Information Sharing Networks in Oligopoly

35 Pages Posted: 4 Jul 2008

See all articles by Sergio Currarini

Sergio Currarini

University of Leicester - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia

Francesco Feri

University of London

Date Written: July 3, 2008

Abstract

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 "critical nodes". Finally, when signals are correlated, the empty network may not be pairwise stable when the number of firms and/or correlation are large enough.

Keywords: Information sharing, oligopoly, networks, Bayesian equilibrium

JEL Classification: D43, D82, D85, L13

Suggested Citation

Currarini, Sergio and Feri, Francesco, Information Sharing Networks in Oligopoly (July 3, 2008). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 16_08. Available at SSRN: https://ssrn.com/abstract=1154989 or http://dx.doi.org/10.2139/ssrn.1154989

Sergio Currarini (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Francesco Feri

University of London ( email )

Senate House
Malet Street
London, WC1E 7HU
United Kingdom

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