The effect of public information on competition and R&D investment

Jim Jin () and Michael Tröge

No FS IV 97-28, Discussion Papers, Research Unit: Market Dynamics from WZB Berlin Social Science Center

Abstract: Using a simple method we show that, in contrast to the case of Bertrand and Cournot competition, better public information about demand reduces the profits of firms playing a R&D cost reduction game. Welfare increases with the precision of public information in the Cournot and cost reduction games, but not in the Bertrand game. We conclude that the provision of public information about demand in the distant future is useful and necessary in order to promote investment in R&D. Information about demand in the short term, however, should not be released.

Date: 1997
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