Oligopoly models and information transmission
The thesis contains 5 independent papers together with an introduction and a general conclusion. All five papers consider private information in simple oligopoly models with linear demand and cost functions. The problem to be analysed is the extend to which private information is transmitted between firms and the consequences thereof. In principle the transmission (or dissemination) can take place voluntarily or involuntarily. In the case of voluntary information transmission (or sharing) we assume that this is done honestly. One of the main results in this strand of the literature is that firms have no incentives to share information unless they can collude over strategies. In chapter II and III we show that this conclusion is not generally true. In chapter II we consider the incentive for risk-averse firms to share their private information. We show that the assumption of risk-aversion in some cases reverse the conclusion in the literature. In chapter III we show that there are cases in which private information and the sharing thereof within a collusive arrangement prove detrimental to the size of a stable collusive arrangement. Thus in some cases private information imply a disincentive to collude. Chapter IV and V looks at the effect of uncertainty and private information on a two-stage duopoly model in which firms first choose capacity, then compete over prices. In chapter IV we show that no pure strategy equilibrium exists regardless of whether uncertainty is resolved before or after capacity is chosen. A mixed strategy equilibrium is shown to exist, and the equilibrium is worked out for a specific distribution of the random variable. In chapter V we modify the equilibrium concept by imposing a no-mill-price-undercutting rule. We shown that if firms' capacities differ, the firm with the highest capacity endogeneously sets the higher price. Examples of private-asymmetric information are considered and the main finding from the examples are that there are cases where neither firm wants to share the information of the best informed. Chapter VI which is joint work with Norman J. Ireland considers involuntary information transmission via output plans. This allows us to rationalise positive consistent conjectures in a simple oligopoly model. General for all the models considered is that the results not only differ from those found under certainty, but also that the results are possibly non-robust, especially with regards to changes in information structures and functional forms.