The Competitive Effects of Information Sharing

42 Pages Posted: 14 Nov 2016

See all articles by John Asker

John Asker

UCLA

Chaim Fershtman

Tel Aviv University - Eitan Berglas School of Economics; Tinbergen Institute

Jihye Jeon

New York University (NYU) - Leonard N. Stern School of Business

Ariel Pakes

National Bureau of Economic Research (NBER); Harvard University - Department of Economics

Date Written: November 2016

Abstract

We investigate the impact of information sharing between rivals in a dynamic auction with asymmetric information. Firms bid in sequential auctions to obtain inputs. Their inventory of inputs, determined by the results of past auctions, are privately known state variables that determine bidding incentives. The model is analyzed numerically under different information sharing rules. The analysis uses the restricted experience based equilibrium concept of Fershtman and Pakes (2012) which we refine to mitigate multiplicity issues. We find that increased information about competitors’ states increases participation and inventories, as the firms are more able to avoid the intense competition in low inventory states. While average bids are lower, social welfare is unchanged and output is increased. Implications for the posture of antitrust regulation toward information sharing agreements are discussed.

Suggested Citation

Asker, John William and Fershtman, Chaim and Jeon, Jihye and Pakes, Ariel, The Competitive Effects of Information Sharing (November 2016). NBER Working Paper No. w22836. Available at SSRN: https://ssrn.com/abstract=2868935

John William Asker (Contact Author)

UCLA ( email )

8283 Bunche Hall
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Chaim Fershtman

Tel Aviv University - Eitan Berglas School of Economics ( email )

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Israel
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Tinbergen Institute ( email )

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Jihye Jeon

New York University (NYU) - Leonard N. Stern School of Business ( email )

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United States

Ariel Pakes

National Bureau of Economic Research (NBER) ( email )

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Harvard University - Department of Economics ( email )

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United States
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