An Efficient Market Mechanism with Endogenous Information Acquisition: Cournot Oligopoly Case
- Creators
- Li, Lode
Abstract
The question of how an efficient competitive equilibrium could be reached through a pricing mechanism in which the information acquisition is endogenously determined is addressed. The traditional oligopoly market is extended to include an ex ante information market when there is uncertainty either in the cost function or the demand function. Equilibrium behavior is characterized in a two-stage noncooperative game involving n production firms and m research firms in the industry. As the environment becomes more competitive, meaning, both the information market and the tangible good market become large, the equilibrium random price of the product converges almost surely to its competitive price level with certainty and consequently the total social welfare (consumer plus producer surplus) is maximized.
Additional Information
I gratefully acknowledge the insightful suggestion of my former teacher Morton Kamien. The paper is a continuation work on the basis of "Optimal Research for Cournot Oligopolists," a joint work with my colleagues Richard D. McKelvey and Talbot Page, I have also benefited from my discussion with Leonid Hurwicz and Quang H. Vuong.Attached Files
Submitted - sswp571.pdf
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Additional details
- Eprint ID
- 81498
- Resolver ID
- CaltechAUTHORS:20170915-150746484
- Created
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2017-09-19Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 571