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INFORMATION VALUE UNDER DEMAND UNCERTAINTY AND ENDOGENOUS MARKET LEADERSHIP
Author(s) -
Gilpatric Scott M.,
Li Youping
Publication year - 2015
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12119
Subject(s) - economics , stackelberg competition , microeconomics , oligopoly , duopoly , private information retrieval , first mover advantage , volatility (finance) , complete information , value of information , externality , value (mathematics) , cournot competition , industrial organization , financial economics , mathematical economics , statistics , mathematics , machine learning , computer science
In an oligopoly model with firms choosing to produce in one of two periods, we identify the circumstance under which a firm's having early information regarding stochastic demand results in market leadership. High demand volatility leads to Stackelberg competition with the information‐advantaged firm leading. In the N‐firm case an equilibrium with multiple leaders and multiple followers emerges endogenously. In a duopoly information acquisition game we identify conditions that determine whether neither, one, or both firms will pay to acquire early information and note that one firm's obtaining early information may generate a positive externality benefitting its competitor. Both symmetric and asymmetric outcomes are possible and Stackelberg market leadership may occur in equilibrium, but only when firms have different costs of information. Our finding that an information advantage may convey leadership which then affects the value of information to the players applies to other settings exhibiting first‐mover advantage such as certain public good provision games . ( JEL C72, D82, L13)