Competitive Effects of Disclosure in a Strategic Entry Model

Posted: 17 Feb 2010

See all articles by Alison Kirby Jones

Alison Kirby Jones

Boston University - Questrom School of Business

Yuhchang Hwang

Arizona State University (ASU) - School of Accountancy; China Europe International Business School

Date Written: March 1, 2000

Abstract

We investigate the welfare consequences of incumbent firms’ mutual disclosure of cost information when there is a threat of entry from a firm not required to disclose its private cost information. New effects of disclosure are observed relative to no-entry models, with the result that incumbents’ expected output is a decreasing function of the disclosure level. However, further analysis shows that increased disclosure usually increases incumbent expected profits and decreases expected consumer surplus, despite the additional entry effect of disclosure. Such analytical derivations provide objective input to the FASB as they attempt to predict the competitive effects of changing mandated disclosure requirements.

Keywords: Disclosure, Competitive Effects, Entry, Oligopoly

Suggested Citation

Kirby Jones, Alison and Hwang, Yuhchang, Competitive Effects of Disclosure in a Strategic Entry Model (March 1, 2000). Review of Accounting Studies, Vol. 5, No. 1, 2000. Available at SSRN: https://ssrn.com/abstract=1553889

Alison Kirby Jones (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Yuhchang Hwang

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

China Europe International Business School ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

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