Optimal research for cournot oligopolists |
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| Institution: | 1. Department of Accountancy, National Cheng Kung University, Tainan, Taiwan;2. Institute for Financial and Accounting Studies, Xiamen University, China;3. Business School, Shantou University, China;4. Griffith Business School, Griffith University, Nathan, QLD 4111, Australia;1. The University of North Carolina at Chapel Hill, Gardner Hall CB3305,Chapel Hill, NC 27599, USA;2. The Federal Reserve Bank of Richmond,701 East Byrd Street, Richmond, VA 23219, USA |
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| Abstract: | An oligopolistic industry faces uncertain demand. Firms can conduct research prior to production, obtaining private data that is informative of the unknown parameters of demand. Firm strategies thus consist of a level of research and a subsequent production strategy based on their research findings. We characterize the Bayes equilibrium of such a model when demand is linear, with unknown intercept, and the information structure has linear conditional expectations. We compare the solution to an efficiency standard, finding inefficiencies even in the competitive limit. |
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