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Published 1982 | Published
Journal Article Open

Risk Advantages and Information Acquisition

Abstract

In some competitive situations under uncertainty, less risk adverse competitors have an advantage over more risk adverse opponents. Private information acquisition by the advantaged players diminishes this advantage by reducing the risk faced by their opponents in a Nash equilibrium. This tradeoff between risk advantages and informational advantages is examined in the context of a duopoly model with uncertain demand. It is found that private information acquisition may reduce the risk advantage by so much that the overall effect is to make the informed, less risk adverse competitor worse off and the uninformed, more risk adverse competitor better off.

Additional Information

The Bell Journal of Economics © 1982 RAND Corporation. Spring 10982. I wish to thank Alvin Klevorick, Tom Lee, and a reader for The Bell Journal of Economics for helpful comments.

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Created:
August 19, 2023
Modified:
October 17, 2023