Amir Ziv

Information Sharing in Oligopoly: The Truth Telling Problem


Adobe Acrobat PDF

While under some circumstances information sharing in oligopoly may be beneficial, the literature ignores the possibility of strategic information sharing by assuming verifiability of data. I endogenize the incentives for truthful information sharing and prove that if firms have the ability to send misleading information, they will always do so. To overcome this problem I introduce a (costly) mechanism through which the firm will, in its own best interest, reveal the true value of its private information, even though outside verification is impossible. I show that in some cases benefits from information sharing exceed the signalling costs, while in other cases the reverse is true. The fact that I model a two-sided signalling enables me to mitigate the signalling-cost problem. Rather than burning money, oligopolistic rivals may exchange transfer payments, thereby significantly reducing signalling costs.

Source: RAND Journal of Economics
Exact Citation:
Ziv, Amir. "Information Sharing in Oligopoly: The Truth Telling Problem." RAND Journal of Economics 24, no. 3 (Fall 1993): 455-65.
Volume: 24
Number: 3
Pages: 455-65
Date: Fall 1993