Using a natural experiment from a retail gasoline antitrust case, we study how asymmetric information sharing affects oligopoly pricing. Empirically, price competition softens when, following case settlement, information sharing shifts from symmetric to asymmetric, with one firm losing access to high-frequency, granular rival price data. We provide theory and empirics illustrating how strategic ignorance creates price commitment, leading to higher price-cost margins. Using a structural model, we quantify the impact of asymmetric information sharing on firms' profits, finding substantial profit-enhancing effects. These results provide a cautionary tale for antitrust agencies regarding the potential unintended consequences of limiting price information sharing.
Information asymmetries are an important driver of many economic phenomena. The uncertainty that arises from them puts even theoretically rational agents at a distinct disadvantage which can cause less efficient outcomes. In the lab, information asymmetries can cause further problems by increasing the cognitive load for subjects substantially. However, many interactions take place between a more informed party and a less informed party. Thus, it is important to study asymmetric information, and the institutions in which they arise, to inform policy on ways to mitigate them. A commonly proposed solution is information transfer. By allowing agents to voluntarily share private information, they are given a chance to create a perfect information environment in which these problems from asymmetric information no longer exist. In this dissertation, I run three experiments testing asymmetric information and information sharing in the contexts of a Cournot Oligopoly, Final-Offer Arbitration, and a conventional arbitration game. In the first two, agents are given the ability to share private information explicitly, and I am interested in their incentives to do so as well as in how sharing that information affects outcomes. In the third paper, I study the cognitive load of asymmetric information by having subjects switch roles in an attempt to help them better understand their opponent's position. Overall, the sharing of private information is often a good thing for the parties involved, though the specific timing and underlying assumptions of the theoretical model matter. Overall, I find that subjects in experiments do recognize the incentives to share information when given the chance, though not as well as predicted by theory. When they do share in situations where it theoretically is beneficial to do so, they are rewarded. However, asymmetric information remains a difficult obstacle to overcome. Subjects have difficulty correctly assessing the position of their opponents, and many fail to see the benefits of sharing information.
The paper analyzes the effects of informational asymmetries on the market structure of the banking industry in a multi-period model of spatial competition. All lenders face uncertainty with regard to borrowers’ creditworthiness, but, in the process of lending, incumbent banks gather proprietary information about their clients, acquiring an advantage over potential entrants. These informational asymmetries are an important determinant of the industry structure and may represent a barrier to entry for new banks. The paper shows that, in contrast with traditional models of horizontal differentiation, the steady-state equilibrium is characterized by a finite number of banks even in the absence of fixed costs.
"The report assesses the initiatives for information exchange among firms and their consequences for welfare with a view towards the design of competition policy in this domain. To this end the report surveys critically the academic literature on static and dynamic models of competition in their relation to information exchange and examines the main antitrust legislation and cases in Europe and the US."--Page i.
We model differentiated product pricing by firms that possess private information about serially-correlated state variables, such as their marginal costs, and can use prices to signal information to rivals. In a dynamic game, signaling can raise prices significantly above static complete information Nash levels even when the privately observed state variables are restricted to lie in narrow ranges. We calibrate our model using data from the beer industry, and we show that our model can explain changes in price levels and price dynamics after the 2008 MillerCoors joint venture.
We study the incentives of oligopolistic firms to share private information on demand parameters. Differently from previous studies, we consider bilateral sharing agreements, by which firms commit at the ex-ante stage to truthfully share information. We show that if signals are i.i.d., then pairwise stable networks of sharing agreements are either empty or made of fully connected components of increasing size. When linking is costly, non complete components may emerge, and components with larger size are less densly connected than components with smaller size. When signals have different variances, incomplete and irregular network can be stable, with firms observing high variance signals acting as quot;critical nodesquot;. Finally, when signals are correlated, the empty network may not be pairwise stable when the number of firms and/or correlation are large enough.
Applies a modern game-theoretic approach to develop a theory of oligopoly pricing. The text relates classic contributions to the field of modern game theory and discusses basic game-theoretic tools and equilibrium, paying particular attention to developments in the theory of supermodular games.
