Industrial Espionage with a Noisy Intelligence

Yair Tauman (amty21@gmail.com) and Alex Barrachina (alejandro.barrachina@gmail.com)

No 12-06, Department of Economics Working Papers from Stony Brook University, Department of Economics

Abstract: We analyze industrial espionage in a model of two firms: a monopoly incumbent, M, and a potential entrant, E, who owns a noisy intelligence system (IS) of a certain precision a . The IS generates a signal on M’s action and E decides whether or not to enter based on this signal. We show that if a is commonly known, M is the one who benefits from a perfect IS and E who spies on M prefers a less accurate IS. If however a is a private information of E, the opposite result is obtained. E is best off with a perfect IS and M with a less accurate one.

Keywords: Espionage; Monopoly; Entry; Asymmetric information; Signaling game. (search for similar items in EconPapers)
JEL-codes: C72 D82 L10 L12 (search for similar items in EconPapers)
Date: 2012-08
New Economics Papers: this item is included in nep-bec, nep-com and nep-cta
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Persistent link: https://EconPapers.repec.org/RePEc:nys:sunysb:12-06

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