Cooperation in a Differentiated Duopoly when Information is Dispersed: A Beauty Contest Game with Endogenous Concern for Coordination

19 Pages Posted: 14 Feb 2015 Last revised: 23 Jul 2019

See all articles by Camille Cornand

Camille Cornand

Groupe d'Analyse et de Théorie Economique (GATE), CNRS, University of Lyon

Rodolphe dos Santos Ferreira

University of Angers - Bureau of Economic Theory and Application (BETA)

Date Written: February 8, 2017

Abstract

The paper provides a micro-founded differentiated duopoly illustration of a beauty contest, in which the relative weight put on the competition motive of the payoffs is not exogenous but may be manipulated by the players. The conflict between the competition and the fundamental motives, already present in an oligopolistic setting under perfect information, is exacerbated when information is imperfect and dispersed. A conflict arises also in this case between the competition and the coordination motive, ending up in the undervalueing of public information. We show, in the context of a delegation game, how firm owners ease these conflicts by opting for some cooperation, thus moderating the competitive toughness displayed by their managers. By doing so, they also enhance the managers’ concern for coordination and consequently heighten the weight put on public relative to private information.

Keywords: beauty contest, competition, cooperation, coordination, delegation game, differentiated duopoly, dispersed information

JEL Classification: D43, D82, L13, L21

Suggested Citation

Cornand, Camille and dos Santos Ferreira, Rodolphe, Cooperation in a Differentiated Duopoly when Information is Dispersed: A Beauty Contest Game with Endogenous Concern for Coordination (February 8, 2017). Available at SSRN: https://ssrn.com/abstract=2564519 or http://dx.doi.org/10.2139/ssrn.2564519

Camille Cornand (Contact Author)

Groupe d'Analyse et de Théorie Economique (GATE), CNRS, University of Lyon ( email )

93 Chemin des Mouilles
Ecully, 69130
France

Rodolphe Dos Santos Ferreira

University of Angers - Bureau of Economic Theory and Application (BETA) ( email )

61, avenue de la Foret Noire
Strasbourg, 67000
France
+33 03 9024 2073 (Phone)
+33 03 9024 2071 (Fax)

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