The RAND Journal of Economics · 1990 · 248 citations · 24 references
Social SciencesBusiness EconomicsEconomicsCompetition PolicyCorporate DisclosureMicroeconomicsAsymmetric InformationDisclosureInformation AsymmetryInformation Asymmetry In MarketsInformation EconomicsMonopolistic CompetitionDemand UncertaintyInformation Disclosure IncentivesInformation Exchange Between CompetitorsInformation Sharing IncentivesMonopolistic Competition ModelsRegulation Under Information AsymmetryTrade Association Information SharingTrade Associations
The paper develops a monopolistic competition framework to study how trade association disclosure rules affect information‑sharing incentives and welfare for consumers, firms, and society. The framework applies when a single firm cannot influence aggregate market outcomes and serves as a benchmark for analyzing information‑pooling agreements while abstracting from strategic considerations. The study finds that nonexclusionary disclosure eliminates incentives to share information, whereas exclusionary disclosure preserves them, and that information sharing raises total surplus under Cournot competition but lowers it under Bertrand competition in a Quadratic‑Normal model with demand uncertainty.
In this article I propose a monopolistic competition framework to analyze the effects of different disclosure rules used by trade associations on the incentives to share information and on the welfare of consumers, firms, and society. This framework is appropriate whenever a single firm cannot influence aggregate market magnitudes, and serves as a benchmark for the analysis of information-pooling agreements abstracting from strategic considerations. I report two main results. First, a policy of nonexclusionary disclosure destroys the incentives to share information, while exclusionary disclosure preserves them. Second, information sharing increases expected total surplus with Cournot competition but decreases it with Bertrand competition in the context of a Quadratic-Normal model with demand uncertainty.
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Relying on the Information of Interested Parties
Paul Milgrom, John Roberts · The RAND Journal of Economics · 1986 · 1.1K citations