Information Sharing in Duopoly Revisited

Abstract

This paper has investigated the asymmetric policies of information sharing in duopoly. We built on the classic model of Gal-Or (1985), extended to allow different precisions of firms’ private information, as Gal-Or (1985) suggested in her conclusion. We find that asymmetric equilibria will prevail when private information is highly positively correlated and heterogeneity of precisions of private information is sufficiently severe. With extreme cases with uncorrelated and perfectly correlated private signals, respectively, we show that a firm with a less precise private signal will choose full disclosure, while the rival would like to keep its private information secret. Besides, we investigate the robustness of asymmetric equilibria with imperfectly positively correlated signals, and find new predictions on empirical regularity: the more competitive the product market is, the more likely asymmetric equilibria arises; the more segmented the product market is, i.e. the larger ρ, the more likely asymmetric equilibria prevails.

Keywords: Information Sharing, Asymmetric Disclosure

JEL Classification: C72, C73, D82, L13