Economic Theory and Experimental Seminar - Gregory Kubitz (QUT)

Title: Sharing Cost Information in Dynamic Oligopoly

Abstract: We study the effect of sharing cost information in dynamic oligopoly. Firms can agree to verifiably share information about common costs, as with the aggregation of input costs by an industry trade association. Cost information that is not directly shared is revealed through observed prices. We show that information sharing agreements lead to higher prices and reduce the incentive to acquire firm specific cost information. Information sharing decreases consumer surplus when either demand is sufficiently inelastic or goods are sufficiently substitutable. For markets with a large number of firms, information sharing has a minimal impact on expected prices, and can increase both consumer and producer surplus when goods are sufficiently differentiated.