dynamic oligopoly with incomplete information we consider learning and signalling in a dynamic cournot oligopoly where firms have private information about their production costs and only observe the market price which is subject to unobservable demand shocks an equilibrium is markov if play depends on the history only through the firms beliefs about costs and calendar time we characterize symmetric linear markov equilibria as solutions to a boundary value problem in every such equilibrium given a long enough horizon play converges to the static complete information outcome for the realized costs but each firm only learns its competitors average cost the weights assigned to costs and beliefs under the equilibrium strategies are non monotone over time we explain this by decomposing incentives into signalling and learning and discuss implications for prices quantities and welfare

information transmission cournot and bertrand equilibria we examine how incentives for two duopolists to honestly share information change depending upon the nature of competition cournot or bertrand and the nature of the information structure while in earlier papers uncertainty is about an unknown common demand intercept in the present paper uncertainty is about unknown private costs the different information structure reverses the incentives to share information while with unknown common demand sharing is a dominant strategy with bertrand competition and concealing is a dominant strategy with cournot competition with unknown private costs sharing is a dominant strategy with cournot competition and concealing is a dominant strategy with bertrand competition

cournot oligopoly with information sharing this paper studies the incentives for information sharing among firms in a cournot oligopoly facing a linear uncertain demand and an affine conditional expectation information structure no information sharing is found to be the unique equilibrium in two cases in which the signals with equal precision are assumed indivisible and infinitely divisible however the nonpooling equilibrium converges to the situation where the pooling strategies are adopted as the amount of information increases hence the efficiency is achieved in the competitive equilibrium as the number of the firm become large

real rigidity nominal rigidity and the social value of information does welfare improve when firms are better informed about the state of the economy and can thus better coordinate their production and pricing decisions we address this question in an elementary business cycle model that highlights how the dispersion of information can impede both kinds of decisions and in this sense be the source of both real and nominal rigidity within this context we develop a taxonomy for how the social value of information depends on the two rigidities on the sources of the business cycle and on the conduct of monetary policy jel d21 d82 d83 e32 e52

technical efficiency and scope economies in hospitals the main purposes are to develop a method for measuring the economies of scope which involves the use of non parametric production frontiers and does not require information on input prices and to apply this method to individual hospital data drawn from a sample of spanish hospitals the results confirm the presence of technical inefficiencies and also of potential and non exploited economies of scope the combination that produces most economies of scope is that of gynaecology and paediatrics

regulatory discretion and the unofficial economy johnson kaufmann and shleifer 1997 find that the share of the unofficial economy in gdp is determined by the extent of control rights held by politicians and bureaucrats in post communist economies exploring in more detail the role of bribes and using a broader data set from the oecd latin america and transition economies we find that the unofficial economy accounts for a larger share of gdp when there is more corruption and when the rule of law is weaker while these findings are consistent with the earlier results for transition economies in the larger country sample we find it is not necessarily the case that more regulation or higher taxes directly increases the size of the unofficial economy the problem appears to be not regulation or taxation per se but whether the state administrative system can operate without corruption a high level of regulatory discretion helps create the potential for corruption and drive firms into the unofficial economy

a test for subadditivity of the cost function with an application to the bell system stable url http links jstor org sici sici 0002 8282 28198409 2974 3a4 3c615 3aatfsot 3e2 0 co 3b2 rthe american economic review is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgmon jul 2 16 52 19 2007

dodging the grabbing hand the determinants of unofficial activity in 69 countries across 69 countries higher tax rates are associated with less unofficial activity as a percent of gdp but corruption is associated with more unofficial activity entrepreneurs go underground not to avoid official taxes but to reduce the burden of bureaucracy and corruption dodging the grabbing hand in this way reduces tax revenues as a percent of both official and total gdp as a result corrupt governments become small governments and only relatively uncorrupt governments can sustain high tax rates 2000 elsevier science s a all rights reserved

communication networks knowledge and decisions that communication pervades the everyday life of organizations is a statement of the obvious how this widespread communication affects organization s performance is less clear another truism about organizations is that their members are seldom fully knowledgeable of the exact state of the world in which they operate to overcome this information uncertainty burden organizations tend to devote a substantial amount of resources to retrieve information about their environment individual experimentation is a natural way to obtain superior information when the nature and the consequences of the prevailing uncertainty is common to all organization members a natural substitute for replications of individual experiments is to have agents communicate their private information among themselves communication is then a means to save on experimentation costs when they display diminishing returns in another vein shared information fosters coordination between individual agents which is beneficial to the organization as a whole when coordinated actions lead to higher benefits for everyone altogether when each organization member individually ascertains that both uncertainty and coordination are the main driving networked interactions

transparency of information and coordination in economies with investment complementarities how do public and private information affect equilibrium allocations and social welfare in economies with investment complementarities and what is the optimal transparency in the information conveyed for example by economic statistics policy announcements or news in the media we first consider an environment where the complementarities are weak so that the equilibrium is unique no matter the structure of information an increase in the precision of public information may have the perverse effect of increasing aggregate volatility nevertheless as long as there is no value to lotteries welfare unambiguously increases with an increase in either the relative or the absolute precision of public information hence full transparency is optimal this is because more transparency facilitates more effective coordination which is valuable from a social perspective on the other hand when complementarities are strong enough that multiple equilibria are possible more transparency permits the market to coordinate more effectively on either the bad or the good equilibrium in this case constructive ambiguity becomes optimal if there is a high risk that more transparency will lead to coordination failures this abstract was borrowed from another version of this item

aggregation of information in large cournot markets consider a homogeneous product market where firms have private information about an uncertain demand parameter and compete in quantities we examine the convergence properties of bayesian cournot equilibria as the economy is replicated and conclude that large cournot or almost competitive markets do not aggregate information efficiently except possibly when the production technology exhibits constant returns to scale even in a competitive market there is a welfare loss with respect to the first best outcome due to incomplete information in general nevertheless a competitive market is efficient taking as given the decentralized private information structure of the economy endogenous and costly information acquisition is examined and seen to imply that the market outcome always falls short of the first best level with decreasing returns to scale the results are also shown to be robust to the addition of extra rounds of competition which allows firms to use the information revealed by past prices explicit closed form solutions yielding comparative static results are obtained for models characterized by quadratic payoffs and affine information structures

quantifying the black economy measurement without theory yet again i shall argue that measurement without theory is a fair description of the published empirical work aimed at guestimating the size of the hidden or black economy i shall also argue that a mere guestimate of the overall size of the black economy is of limited value for the policy maker it is also important to know who is doing what where how and why then we can see what should and or can be done about legislating for or against the black economy in assessing the various attempts to measure the size of the black economy one should also be aware of a political dimension to some of this work perhaps a large and growing black economy is an indication that the economy is overtaxed and over regulated and a neo liberal adjustment is needed to free it up if a large part of the black economy is social security fraud then maybe unemployment is not really as bad as it looks clearly such political conclusions depended on having good theoretical as well as sound quantitative foundations and both these components were generally missing

information acquisition in global games of regime change abstract we study costly information acquisition in global games of regime change that is coordination games where payoffs are discontinuous in the unobserved state and in the agents average action we show that only symmetric equilibria exist and provide sufficient conditions for uniqueness we then characterize the value of information in these games and link it to the underlying parameters of the model we investigate equilibrium efficiency complementarities in information choices and the trade offs between public and private information we show that information acquisition can be inefficient and that strategic complementarities in actions do not always translate into strategic complementarities in information acquisition finally we find that public and private information can be complements these results contrast findings in linear quadratic models where payoffs depend continuously on both the unobserved state and the agents average action

information use and acquisition in price setting oligopolies asymmetric price setting multi product suppliers have access to multiple sources of information about demand conditions where the publicity of each source corresponds to the cross industry correlation of signals received from it a signal s influence on suppliers prices is increasing in its publicity as well as in its precision the emphasis on relatively public information is stronger for smaller suppliers who control narrower product portfolios when information is endogenously acquired suppliers listen to only a subset of information sources this subset is smaller when products are less differentiated and when the industry is less concentrated smaller suppliers focus attention on fewer information sources the inefficiencies arising from information acquisition and use are identified the associated externalities depend upon the extent of product differentiation the concentration of the industry and the degree of decreasing returns to scale

value and quantity data in economic and technical efficiency measurement this paper calls attention to the implications of using value data in efficiency measurement through data envelopment analysis dea the main contributions are twofold i it provides a reconciliation of the previous literature on analysing issues of quantity and value data in efficiency measurement ii it provides some guidelines on what to do when these issues arise in a data set

learning from prices public communication and welfare we study the effect of releasing public information about productivity or monetary shocks using a micro founded macroeconomic model in which agents learn from the distribution of nominal prices while a public release has the direct beneficial effect of providing new information it also has the indirect adverse effect of reducing the informational efficiency of the price system we show that the negative indirect effect can dominate thus the public information release may increase uncertainty about the monetary shock and reduce welfare we find that the optimal communication policy is always to release either all or none of the information

tax evasion and the optimal inflation tax abstract we developed a simple monetary model to study the effects of tax evasion on the optimal inflation tax the model is constructed so that inflation might be an indirect way of taxing the underground sector of the economy we show that while there are theoretical reasons for positive optimal inflation rates the effects are quantitatively small even in countries with large underground sectors we calculate the optimal nominal interest rate for peru to be between 7 and 19 despite the fact that its underground sector is close to 40 of measured gnp according to our calculations the welfare gain of using inflation to tax the underground sector is also very small

learning from private and public observations of othersʼ actions we study how a continuum of agents learn about disseminated information by observing others actions every period each agent observes a public and private noisy signal centered around the aggregate action taken by the population the public signal represents an endogenous aggregate variable such as a price or a quantity the private signal represents the information gathered through private communication and local interactions we identify conditions such that the average learning curve is s shaped learning is slow initially intensifies rapidly and finally converges slowly to the truth we show that increasing public information always slows down learning in the long run and under some conditions reduces welfare lastly optimal diffusion of information requires that agents strive to be different agents need to be rewarded for choosing actions away from the population average

insisting on a non negative price oligopoly uncertainty welfare and multiple equilibria i study cournot competition under incomplete but symmetric information about the intercept of the linear demand function while assuming that market price must be non negative for all demand realizations although the non negativity assumption is very natural it has only rarely been made in the earlier literature yet it has important economic consequences 1 expected demand effectively becomes convex which means that multiple symmetric pure strategy equilibria can exist and 2 expected total surplus can be larger when the firms do not know demand than when they do the arguments of the paper are relevant also for price competition and for uncertainty about e g cost or the number of firms and these issues are discussed

knowing what others know coordination motives in information acquisition we explore how optimal information choices change the predictions of strategic models when a large number of agents play a game with strategic complementarity information choices exhibit complementarity as well if an agent wants to do what others do they want to know what others know this makes heterogeneous beliefs di cult to sustain and may generate multiple equilibria in models with substitutability agents prefer to difierentiate their information choices we use these theoretical results to examine the role of information choice in recent price setting models and to propose modeling techniques that ensure equilibrium uniqueness

diversification diseconomies of scope and vertical contracting evidence from the taxicab industry this paper studies how firms reorganize following diversification proposing that firms use outsourcing or vertical disintegration to manage diseconomies of scope we also consider the origins of scope diseconomies showing how different underlying mechanisms generate contrasting predictions about the link between within firm task heterogeneity and the incentive to outsource following diversification we test these propositions using microdata on taxicab and limousine fleets from the economic census the results show that taxicab firms outsource by shifting the composition of their fleets toward owner operator drivers when they diversify into the limousine business the magnitude of the shift toward driver ownership is larger in less urban markets where the tasks performed by taxicab and limousine drivers are more similar these findings suggest that 1 firms use outsourcing to manage diseconomies of scope at a particular point in the value chain and 2 interagent conflicts can be an important source of scope diseconomies

endogenous timing in duopoly games stackelberg or cournot equilibria abstract simultaneous versus sequential play is studied in an extended game in a preplay stage players decide whether to select actions in the basic game at the first opportunity or to wait until observing their rivals first period actions in one extended game players first decide when to select actions without committing to actions in the basic game the equilibrium has a simultaneous play subgame unless payoffs in a sequential play subgame pareto dominate those payoffs in another extended game deciding to select at the first turn requires committing to an action both sequential play outcomes are the equilibria only in undominated strategies

one leader and multiple follower stackelberg games with private information this study analyzes one leader and multiple follower stackelberg games with demand uncertainty we demonstrate that the weight on public information regarding a follower s estimation of demand uncertainty determines the strategic relationship between the leader and each follower when the relationship is strategic complement the leader can exit from a market the threshold is determined by the intensity of cournot competition among the followers

first mover disadvantages with private information we consider a leader follower game with output quantities as strategies so as to demonstrate the reduced advantages of the stackleberg leader in a stochastic environment with private information at the equilibrium the strategy of the leader reveals to the follower information about the demand in an attempt to signal low demand the leader contracts his output nevertheless unless the leader s information is infinitely noisy the follower can always correctly infer his signal we find a wide range of parameter values over which the follower is better off compared to the leader

optimal technology choice and investment timing a stochastic model of industrial cogeneration vs heat only production abstract in this paper we develop an economic model that explains the decision making problem under uncertainty of an industrial firm that wants to invest in a process technology more specifically the decision is between making an irreversible investment in a combined heat and power production cogeneration system or to invest in a conventional heat only generation system steam boiler and to purchase all electricity from the grid in our model we include the main economic and technical variables of the investment decision process we also account for the risk and uncertainty inherent in volatile energy prices that can greatly affect the valuation of the investment project the dynamic stochastic model presented allows us to simultaneously determine the optimal technology choice and investment timing we apply the theoretical model and illustrate our main findings with a numerical example that is based on realistic cost values for industrial oil or gas fired cogeneration and heat only generation in switzerland we also briefly discuss expected effects of a co 2 tax on the investment decision

exchange of cost information in oligopoly when do oligopolists gain by sharing their private information about their costs with one another what are the social welfare effects of such information exchange i study these questions by comparing the oligopolists expected profits under a cost sharing agreement with their expected profits in the bayesian equilibrium that would arise without cost sharing i also analyse the firms decisions to form a trade association to share their cost data under conditions of linear demand and cournot behaviour industrywide information exchange is the unique point in the core of the trade association membership game the exchange of cost data increases expected profits and welfare but reduces expected consumer surplus cost sharing increases efficiency by raising the market shares of lower cost firms and reducing the variability of aggregate output consumer surplus is diminished however because the variance of output is reduced and consumer surplus is a convex function of output

trade association disclosure rules incentives to share information and welfare in this article i propose a monopolistic competition framework to analyze the effects of different disclosure rules used by trade associations on the incentives to share information and on the welfare of consumers firms and society this framework is appropriate whenever a single firm cannot influence aggregate market magnitudes and serves as a benchmark for the analysis of information pooling agreements abstracting from strategic considerations i report two main results first a policy of nonexclusionary disclosure destroys the incentives to share information while exclusionary disclosure preserves them second information sharing increases expected total surplus with cournot competition but decreases it with bertrand competition in the context of a quadratic normal model with demand uncertainty

economies of diversification a generalization and decomposition of economies of scope abstract the paper investigates the benefits of diversification for a multi product firm it examines economies of diversification reflecting the cost reduction associated with producing outputs in an integrated firm compared to specialized firms the analysis applies under complete specialization as well as partial specialization when firms are not fully specialized and or when the specialization scheme does not cover all outputs it decomposes economies of diversification into four additive parts a part measuring complementarity among outputs a part reflecting economies of scale a part reflecting convexity and a part reflecting the role of fixed cost this new decomposition appears useful in investigating how scale effects complementarity effects and convexity effects can contribute to economies of scope in a multiproduct firm and helps generate valuable insights into the economics of specialization for multiproduct firms

research note cost uncertainty is bliss the effect of competition on the acquisition of cost information for pricing new products we examine the optimal acquisition of information about a common uncertain cost factor by two competing firms seeking to price a new product we show that existing findings regarding the acquisition of demand information or the acquisition of either cost or demand information related to quantity decisions do not extend to this case for cost information with price competition the information acquisition strategies are strategic substitutes even though the price decisions that are based on the information are strategic complements competition decreases the expected value of cost information moreover when competition is intense and the cost of information low identical firms do not acquire the same amount of cost information even when information is free cost uncertainty acts like a fog that lessens the destructive effect of price competition when products are close substitutes and thus increases expected profits buyers on the other hand are better off when competing firms are informed about cost even though the expected value of cost information strictly decreases with competition the optimal price for industry specific cost information set by an information vendor increases with competition when the firms products are sufficiently substitutable

acquiring information through peers we develop an endogenous network formation model in which agents form connections to acquire information our model features complementarity in actions as agents care not only about accuracy of their decision making but also about the actions of other agents in equilibrium the information structure is a hierarchical network and under weakly convex cost of forming links the equilibrium network is core periphery although agents are ex ante identical there is ex post heterogeneity in payoffs and actions

a quantitative analysis of inflation as a tax on the underground economy abstract inflation rates are more dispersed and are persistently higher in developing countries this paper quantifies the importance of the public finance motive for inflation in the presence of a tax evading sector the underground economy the approach is motivated by the observation that the underground economy is especially large in poor countries the analysis builds on a general equilibrium monetary model with two production sectors where income in one of the sectors cannot be taxed a benevolent government finances its budget using an optimal combination of the income tax rate and the inflation rate the model is first calibrated to the u s economy and is then used for a cross country simulation the resulting relationships between the size of an underground economy inflation rate income tax rate and the share of seigniorage in the government revenue rationalize the cross country data quantitatively well

corruption and the shadow economy an empirical analysis this paper analyzes the influence of the shadow economy on corruption and vice versa we hypothesize that corruption and the shadow economy are substitutes in high income countries while they are complements in low income countries the hypotheses are tested for a cross section of 98 countries our results show that there is no robust relationship between corruption and the size of the shadow economy when perceptions based indices of corruption are used employing an index of corruption based on a structural model however corruption and the shadow economy are complements in countries with low income but not in high income countries

policy with dispersed information information regarding economic fundamentals is widely dispersed in society is only imperfectly aggregated through prices or other indicators of aggregate activity and cannot be centralized by the government or any other institution in this paper we seek to identify policies that can improve the decentralized use of such dispersed information without requiring the government to observe this information we show that this can be achieved by appropriately designing the contingency of taxation on ex post public information regarding the realized fundamentals and aggregate activity when information is common as in the ramsey literature or when agents have private information only about idiosyncratic shocks as in the mirrlees literature the contingency on fundamentals alone suffices for efficiency when instead agents have private information about aggregate shocks the contingency on aggregate activity is crucial an appropriate combination of the two contingencies permits the government to i dampen the impact of noise and hence reduce non fundamental volatility without also dampening the impact of fundamentals ii induce agents to internalize informational externalities and hence improve the speed of social learning iii restore a certain form of constrained efficiency in the decentralized use of information and iv guarantee that welfare increases with the provision of any additional information jel c72 d62 d82

gathering information before signing a contract after being offered a contract an agent has the possibility to observe the state of nature this enables him to refuse the contract in unfavorable states but burdens him with an observation cost the authors show that the principal offers a contract in which the agent has no incentive to observe the state of nature and they explore its terms later they show that the principal finds it profitable to organize competition between several agents even though he has monopoly power and can push a single agent down to his reservation utility copyright 1992 by american economic association

a stochastic version of a stackelberg nash cournot equilibrium model we consider a stochastic version of the stackelberg nash cournot model proposed by murphy et al 1983 ln the first stage the leader chooses and announces his production level taking into account the reaction of the followers the decision of the leader is taken when market demand is uncertain in the second stage the followers knowing the leader s output react to this level according to the cournot assumption at this stage demand is known we study the extension of the murphy et al model and give a numerical illustration of this model using the european gas market

innovation adoption and welfare under uncertainty the incentives of firms to adopt a new process need not coincide with maximum expected consumer surplus or social welfare if there is uncertainty before the process is adopted and if the only loss from failure is a fixed cost in some cases no firm will adopt an innovation likely to fail although expected welfare is maximized if one adopts in other cases both firms will adopt an innovation likely to succeed although expected welfare is maximized if one firm adopts this occurs because rivalry between firms leads them to adopt together when total expected profits are higher if one firm adopts copyright 1992 by blackwell publishing ltd

higher education costs and scale and scope economies higher education multi product cost functions are estimated for the public and private sectors disaggregated by research comprehensive baccalaureate and associate level institutions the output mix incorporates professional school teaching output in addition to undergraduate and graduate teaching and research outputs scale and scope economies are examined by sector and institutional level also accounting for regional differences ray economies are found throughout the private sector but confined to lower level public institutions research economies are widespread throughout all sector levels economies of scope prevail among private institutions across levels but only among comprehensive and baccalaureate public colleges

von stackelberg and cournot duopoly choosing roles under what circumstances will firms agree on the choice of roles of leader and follower in the von stackelberg duopoly model a key determinant is the slope of the firms reaction function in either price or quantity space the duopolists will disagree over the choice of roles if they have downward sloping reaction functions each will prefer to be the leader they will also disagree if they have upward sloping reaction functions and similar profit functions each will prefer that the other be the leader preferences between von stackelberg and cournot outcomes are also considered

pricing network effects the increase in the information that firms can collect or purchase about network effects across consumers motivates two important questions how does a firm s pricing strategy react to detailed information on network effects are the availability and use of such information beneficial or detrimental to consumer surplus we develop a model in which a monopoly sells a network good and price discriminates based on information about consumers influence and consumers susceptibility to influence the monopoly optimally offers consumers price discounts for their influence and charges price premia for their susceptibility the price premia and the price discounts are simple functions of the pattern of network effects we determine under which conditions relative to uniform price consumer surplus increases and we characterize the value of information on network effects for the monopoly

optimal research for cournot oligopolists we extend the classical cournot model to take account of uncertainty in either the cost function or the demand function by undertaking research firms can acquire private asymmetric information to help resolve their uncertainty and make a more informed production decision the model is a two stage game in the first stage research levels are chosen and in the second stage conditional on private research outcomes production decisions are made we find that for a linear continuous information structure there is a unique nash equilibrium to the game in the equilibrium there may be an inefficient amount of aggregate research and there may be incomplete pooling as well the model specializes to the classical case when the cost of research is zero and each firm gains essentially the same information by doing an infinite amount of research or when the cost of research is so high no firm undertakes research

rational expectations information acquisition and competitive bidding most rational expectations market equilibrium models are not models of price formation and naive mechanisms leading to such equilibria can be severely manipulable in this paper a bidding model is developed which has the market like features that bidders act as price takers and that prices convey information higher equilibrium prices convey more favorable information about the quality of the objects being sold than do lower prices bidders can benefit from trading only if they have a transactions motive or if they have access to inside information apart from exceptional cases prices are not fully revealing a two stage model is developed in which bidders may acquire information at a cost before bidding and for which the equilibrium price is fully revealing resolving a well known paradox

the value of ignorance this article provides a new perspective on the information structure of an agent in a standard model of adverse selection before the contracting takes place the agent has the opportunity to gather private information on a relevant parameter that affects final payoffs i allow for the possibility that the agent remains uninformed with some probability the agent s optimal choice of information structure is derived and it is shown that in the case of two states of nature the possibility of remaining ignorant has a positive strategic value for the agent since a poor information structure generates strategic benefits there will be no equilibrium in which the agent is perfectly informed even if additional information is costless at the margin

endogenous private information structures we formally incorporate the option to gather information into a game and thus endogenize the information structure we ask whether models with exogenous information structures are robust with respect to this endogenization any nash equilibrium of the game with information acquisition induces a nash equilibrium in the corresponding game with an exogenous structure we provide sufficient conditions on the structure of the game for which this remains true when nash is replaced by sequential we characterize the sequential nash equilibria of games with exogenous information structures that can arise as a sequential nash equilibrium of games with endogenous information acquisition

information value under demand uncertainty and endogenous market leadership in an oligopoly model with firms choosing to produce in one of two periods we identify the circumstance under which a firm s having early information regarding stochastic demand results in market leadership high demand volatility leads to stackelberg competition with the information advantaged firm leading in the n firm case an equilibrium with multiple leaders and multiple followers emerges endogenously in a duopoly information acquisition game we identify conditions that determine whether neither one or both firms will pay to acquire early information and note that one firm s obtaining early information may generate a positive externality benefitting its competitor both symmetric and asymmetric outcomes are possible and stackelberg market leadership may occur in equilibrium but only when firms have different costs of information our finding that an information advantage may convey leadership which then affects the value of information to the players applies to other settings exhibiting first mover advantage such as certain public good provision games jel c72 d82 l13

central bank communication design in a lucas phelps economy abstract in a lucas phelps island economy an island has access to many informative signals about demand conditions each signal incorporates both public and private information the correlation of a signal s realizations across the economy determines its publicity if information sources differ in their publicity then price formation and expectations formation processes separate causing output gaps to open an output stabilizing central bank prefers averagely public information and sometimes limits the clarity of its policy announcements to achieve this the bank s incentive to engage privately in costly information acquisition and transmission is strongest not for the most influential signals but instead for those which drive the largest wedge between prices and expectations signals that are far from averagely public

pre commitment and flexibility abstract this paper considers several related strategic duopoly settings in which uncertainty creates an option value from retaining flexibility by delaying investment or output decisions until after uncertainty is resolved this value of flexibility must be weighed against the strategic value of pre commitment yielding a trade off between flexibility and pre commitment we obtain a simple characterization of the timing of output decisions as a consequence of the degree of uncertainty particular attention is paid to the implications for entry deterrence by an incumbent firm and to the possible flexibility enhancing effects of investment in capital

the hard shadow of the greek economy new estimates of the size of the underground economy and its fiscal impact this article presents new estimates of the greek underground economy and explores the link between the underground economy and aggregate debt we show that the greek underground economy has been underestimated heavily and has been on a rising trend again since greece adopted the euro we also present evidence that the size of the underground economy is positively related to the debt to gdp ratio implying that fighting the underground economy is also conducive to financial and macroeconomic stability our results suggest that for our sample of 11 emu member countries the loss of the inflation tax as an economic policy instrument had drastic consequences while the underground economy did not have a statistically significant impact on aggregate debt before the introduction of the euro it has pushed up the debt to gdp ratio in our sample since

scale and scope efficiencies through hospital consolidations the hospital sector in the province of ontario has recently completed a large scale restructuring marked by wide ranging hospital closures mergers and program transfers given a generally inconclusive economics literature regulators used an accounting as opposed to an economic approach when predicting gains to consolidations this paper uses an economic cost function to examine economies of scale and scope in the years preceding restructuring where there was little doubt that economies were possible issues relating to output aggregation functional form and scale and scope testing are addressed and an equilibrium cost function is derived from an estimated short run function to measure the cost concepts of interest using index and direct approaches we examine a variety of potential reconfigurations and conclude that there were indeed large scale unexploited gains to strategic consolidation in the hospital sector furthermore these gains may not have been detected using standard approaches in the literature

information acquisition and welfare we study information acquisition in a flexible framework with strategic complementarity or substitutability in actions and a rich set of externalities that are responsible for possible wedges between the equilibrium and the efficient acquisition of information first we relate the in efficiency in the acquisition of information to the in efficiency in the use of information and explain why efficiency in the use is no guarantee of efficiency in the acquisition next we show how the acquisition of private information affects the social value of public information i e the comparative statics of equilibrium welfare with respect to the quality of public information finally we illustrate the implications of the results in a monetary economy with price rigidities and dispersed information about productivity shocks

economies of scale in biogas production and the significance of flexible regulation abstract biogas production is characterised by economies of scale in capital and operational costs of the plant and diseconomies of scale from transport of input materials we analyse biogas in a danish setting where most biogas is based on manure we use a case study with actual distances and find that the benefits of scale in capital and operational costs dominate the diseconomies of increasing transport distances to collect manure to boost the yield it is common to use co substrates in the biogas production we investigate how costs and income changes when sugar beet is added in this case study and demonstrate that transport cost can be critical in relation to co substrates further we compare the new danish support for upgraded biogas with the traditional support for biogas being used in combined heat and power production in relation to scale economies we argue that economies of scale is facilitated by the new regulation providing similar support to upgraded biogas fed into the natural gas grid however in order to keep transport costs low we suggest that the biogas plants should be allowed to use and combine as many co substrates as possible respecting the sustainability criteria regarding energy crops in danish legislation

gathering information before the contract is offered the case with two states of nature abstract focusing on a baron myerson model with two states of nature in the first part of the paper we study the contract that a principal would offer to an agent when he does not know whether the agent is informed or not about the state of nature in the second we endogenize the information of acquisition and show that in equilibrium a baron myerson type contract will never be offered

measuring and decomposing economies of diversification an application to biogas fuelled cogeneration plants in austria abstract this paper investigates the existence and the degree of economies of diversification for small scaled renewable fuelled cogeneration systems using 2014 cross sectional data from 67 austrian biogas plants it is the first study applying the recently introduced concept of economies of diversification proposed by chavas and kim 2010 which is a generalization and decomposition of economies of scope economies of diversification are decomposed into three additive parts a part measuring complementarity among outputs a part reflecting economies of scale a part reflecting convexity in addition this paper extends the decomposition introduced by chavas and kim 2010 in such a way that the contribution of each input to economies of diversification and its components can be investigated the results indicate substantial cost savings from diversification for very small scaled plants 100 kwel most of the cost savings come from scale economies for larger plants 250 kwel positive complementarity and convexity effects are the main source of economies of diversification and outweigh the negative effect from scale diseconomies in addition to substantial fuel feedstock cost reductions significant costs saving effects from the jointness in labour and other inputs positively contribute to the complementarity effect while on average capital and labour costs positively contribute to economies of scale feedstock costs work in the direction of diseconomies of scale

duopoly information equilibrium cournot and bertrand abstract in a duopoly model where firms have private information about an uncertain linear demand it is shown that if the goods are substitutes not to share information is a dominant strategy for each firm in bertrand cournot competition if the goods are complements the result is reversed furthermore the following welfare results are obtained 1 i with substitutes in cournot competition the market outcome is never optimal with respect to information sharing but it may be optimal in bertrand competition if the products are good substitutes with complements the market outcome is always optimal 2 ii bertrand competition is more efficient than cournot competition 3 iii the private value of information to the firms is always positive but the social value of information is positive in cournot and negative in bertrand competition

asymmetric information acquisition and behavior in role choice models an endogenously generated signaling game the authors employ a static homogeneous good duopoly model wherein firms can choose to produce in one of two periods the model allows agents to acquire information and then traces the impact of the information pattern on subsequent production behavior asymmetric information acquisition leads to a unique production role choice pattern the informed uninformed firm chooses to assume the leader s follower s role moreover if information is costly the typical equilibrium involves only one firm acquiring information thus identical firms with identical opportunities choose to become asymmetrically informed and produce sequentially this is the unique refined equilibrium outcome copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

economies of diversification in the banking industry abstract this paper defines a new measure economies of diversification to examine the cost effect of product line expansion this measure is a special case of expansion path subadditivity and contains economies of scope as a special case a nonparametric frontier technique which isolates the effects of inefficiency and scale is used to measure economies of diversification applied to a set of 468 u s depository institutions operating in 1984 we find slight diseconomies of diversification diseconomies of diversification and inefficiency due to the overutilization of resources are found to be more important determinants of bank costs than is the failure to operate at optimal scale

market information and firm performance the value of new information depends on how accurate the information is but it may also depend on the characteristics of the firm and the nature of the industry it operates in we develop a game theoretic model to understand how firm and industry characteristics moderate the effect of market information on firm profits our results suggest that information is more valuable when product substitutability is higher suggesting that information is of greater value in more competitive industries our results also suggest that although industry size does not affect the value of information information is more valuable for larger firms we find that except under some conditions more precise market information has a greater impact on profits in a stackelberg mode of conduct than in a bertrand nash mode

an analysis of the implications of uncertainty and agency problems on the wealth effects to acquirers of private firms abstract extensive empirical work shows that bidders do not gain from the acquisition of publicly traded targets but experience positive excess returns in the acquisition of privately held firms this study investigates how two important differences between private and public firms namely informational uncertainty and ownership characteristics impact the returns to acquirers a sample of targets that were acquired shortly after filing for an ipo was collected to circumvent the lack of information on private firms in spite of the special characteristics of these targets the listing effect is still prevalent in this sample the results of the analysis are consistent with the hypothesis that acquirers gain in the acquisition of private firms because these targets have a relatively weaker bargaining position due to informational and agency problems and costly access to external capital markets to finance growth opportunities

incentives for information production and disclosure in a duopolistic environment this paper examines the nature of the equilibrium solution to the duopoly problem under various incomplete information structures and the incentives to produce and disclose information attention is focused on the duopolists cost functions the results indicate that disclosure of such information is generally beneficial to the duopolists

uncertainty resolution private information aggregation and the cournot competitive limit a cournot model of oligopoly in which otherwise identical firms have private differential information about the common cost of production and a shared but unknown demand curve is examined a bayesian equilibrium of the corresponding game of incomplete information is solved for explicitly and analysed in the symmetric equilibrium different firms produce at different output levels because they have different information because the information individual firms have is random total output and hence market price is also random for any finite number of firms the main result of the paper relates to the asymptotic properties of the equilibrium when the number of firms becomes large under fairly general conditions on the joint distribution of demand and individual firms information about demand the random equilibrium price converges almost surely to a constant in the limit more importantly this price equals the perfectly competitive price in other words in large markets even if no firm knows the true market demand curve and firms are not price takers and do not use price as a signal to improve their information the competitive price will prevail with certainty in the limit aggregate outcomes are as if all firms shared their private information with each other

cournot competition and the social value of information in a differentiated product cournot model each supplier receives informative signals about demand the cross industry correlations of the signals differ more public signals have higher correlation coefficients in equilibrium information is used inefficiently from the industry s perspective information is over used and too much emphasis is placed on relatively public signals from the consumer s perspective information is under used and too much emphasis is placed on relatively private signals welfare is enhanced by increasing the use of information as desired by consumers but re balancing that use away from public signals as desired by the industry if information is costly and endogenously acquired then suppliers acquire too much new information but they use it too little

the monetary method to measure the shadow economy the forgotten problem of the initial conditions abstract we show that when the money demand function used to estimate the size of the shadow economy includes the lagged dependent variable the need to assume a known initial condition reappears as it was the case in the early monetary methods

information acquisition and welfare in network games abstract this paper studies information acquisition and use in network games the network structure incorporates both strategic complements positive links and substitutes negative links an information use game played on a correlation adjusted network is derived equilibrium inefficiencies in both acquisition and use of information are characterized inefficient bunching obtains in information acquisition where the spread in equilibrium signal precisions is below that prescribed by the planner the welfare analysis offers a policy intervention publicizing players information investments the more linked a player is positively or negatively the more strongly they respond to the policy to influence others information acquisition and use

endogenous information acquisition in bayesian games with strategic complementarities abstract this paper studies covert or hidden information acquisition in common value bayesian games of strategic complementarities using the supermodular stochastic order to arrange the structures of information increasingly in terms of preferences we provide novel easily interpretable and verifiable though restrictive conditions under which the value of information is increasing and convex and study the implications in terms of the equilibrium configuration increasing marginal returns to information leads to extreme behavior in that agents opt either for the highest or the lowest quality signal so that the final analysis of this complex game simplifies greatly into that of a two action game this result can rationalize the complete information game as an endogenous outcome finally we also establish that higher quality information leads players to select more dispersed actions in the bayesian game

information acquisition and relative efficiency of competitive oligopoly and monopoly markets this paper analyzes the relative efficiency of a competitive equilibrium against cournot oligopoly and monopoly equilibria when firms have diverse private information about the stochastic market demand when firms have information of the same precision the competitive equilibrium yields a larger expected welfare however when information is costly cournot oligopoly and monopoly firms acquire more information and hence may yield a larger expected welfare than the competitive firms under certain conditions the author also finds that competitive firms acquire less than the efficient level of information while cournot oligopoly and monopoly firms may acquire more than the efficient level copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

measuring economies of scope for cogeneration systems in korea a nonparametric approach this study empirically identifies the existence and the degree of economies of scope for cogeneration systems in korea we derive the index of economies of scope and estimate it by using a nonparametric approach of linear programming method based on the empirical results we explicitly present that there exist economies of scope for cogeneration in korea with total cost reduction of 13 1 in addition we show that the cost saving effects from the jointness in capital and labor are also significant in addition to that in fuel

efficient use of information and social value of information this paper analyzes equilibrium and welfare for a tractable class of economies games that have externalities strategic complementarity or substitutability and heterogeneous information first we characterize the equilibrium use of information complementarity heightens the sensitivity of equilibrium actions to public information raising aggregate volatility whereas substitutability heightens the sensitivity to private information raising cross sectional dispersion next we define and characterize an efficiency benchmark designed to address whether the equilibrium use of information is optimal from a social perspective the efficient use of information reflects the social value of aligning choices across agents finally we examine the comparative statics of equilibrium welfare with respect to the information structure the social value of information is best understood by classifying economies according to the inefficiency if any in the equilibrium use of information we conclude with a few applications including production externalities beauty contests business cycles and large cournot and bertrand games

monopoly competition and information acquisition abstract an incumbent monopolist is uncertain about its linear demand but can acquire public information at a cost we determine how an entry threat affects the firm s information acquisition if returns to scale are constant and the state contingent demands become more dispersed as output increases then entry reduces information acquisition if however either the incumbent or entrant has increasing returns or if the state contingent demands are nonlinear or fail increasing dispersion then entry can increase information finally entry can hurt consumers although entry always increases output it can decrease information consumers sometimes prefer a better informed monopoly to a duopoly

investment efficiency and product market competition does more competition lead to more information production and greater investment efficiency this question is largely unexplored in the finance literature this article provides both a model and a series of extensive empirical tests the model features a 2 stage bayesian game in differentiated products market competition we find that competition causes firms to acquire less information and investments to become more inefficient relative to a first best case with the same market structure empirically the panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries

beauty contests and iterated expectations in asset markets in a financial market where traders are risk averse and short lived and prices are noisy asset prices today depend on the average expectation today of tomorrow s price thus iterating this relationship the date 1 price equals the date 1 average expectation of the date 2 average expectation of the date 3 price this will not in general equal the date 1 average expectation of the date 3 price we show how this failure of the law of iterated expectations for average belief can help understand the role of higher order beliefs in a fully rational asset pricing model and explain over reaction to noisy public information

optimal information acquisition for heterogenous duopoly firms abstract this paper analyzes a stochastic duopoly market in which heterogenous firms acquire costly information about the stochastic market demand prior to their production decisions the equilibrium amounts of information acquired by each firm are compared the comparative statics analyses show the differential effects of a change in information cost the degree of uncertainty in the market demand and the demand and cost function parameters journal of economic literature classification numbers d82 l13 l15

free entry does not imply zero profits traditional economic wisdom says that free entry in a market will drive profits down to zero this paper shows that profits may remain bounded away from zero when firms have to make a negligible small investment to learn the demand

strategic factor market intelligence an application of information economics to strategy formulation and competitor intelligence this paper develops a model of information acquisition decisions by firms that are competing in a strategic factor market barney 1986 to purchase a scarce resource whose value is unknown and differs across firms the model builds on the argument that more accurate expectations about the firm specific value of resources is other than luck the only way for firms to obtain the specific resources required for competitive advantage we address the more specific question of what types of information firms should gather to accomplish this goal the model generates a series of testable hypotheses about how a firm s optimal mix of different types of information is affected by a number of factors including the level of uncertainty about the value of the resource being acquired the rarity imitability and nonsubstitutability of that resource the level of inscrutability of firms pre existing stocks of resources and firms information gathering and information processing capacities

an overview of feed in tariffs premiums and tenders to promote electricity from biogas in the eu 28 abstract the eu has assumed objectives for energy sustainability and the fight against climate change in this regard the generation of biogas allows contributions to the 2020 established targets the eu is leader in the production of biogas representing 60 of total global production in 2011 the estimates of the contribution of biogas to electricity generation for 2020 in the eu 28 represent 1 5 within the total energy mix this paper analyzes the measures implemented in the eu 28 to promote biogas relating them to the country targets established in their national renewable energy action plans currently 19 countries apply some measure of price and or amount 14 use feed in tariffs 6 premium tariffs and 1 uses tenders a trend has been observed to reduce public financial support to promote biogas linked to the reduction of the cost of this technology and to the attempt to increasingly link it to the markets however excessive linking to the market hinders its development putting the attainment of 2020 targets at risk consequently the feed in tariff or premium tariff systems used in each country must be designed in agreement with the peculiarities of the development of their markets to be able to guarantee suitable development

endogenous information acquisition in coordination games in the context of a beauty contest coordination game in which payoffs 1 depend on the quadratic distance of actions from an unobserved state variable and 2 from the average action players choose how much costly attention to pay to vari 3 ous informative signals each signal has an underlying accuracy how precisely it 4 identifies the state and a clarity how easy it is to understand the unique linear 5 equilibrium has interesting properties the signals which receive attention are the 6 clearest available even if they have poor underlying accuracy the number of sig 7 nals observed falls as the complementarity of players actions rises and if actions 8 are more complementary the information endogenously acquired in equilibrium 9 is more public in nature the consequences of rational inattention constraints on 10

cost revenue and profit efficiency measurement in dea a directional distance function approach abstract estimation of efficiency of firms in a non competitive market characterized by heterogeneous inputs and outputs along with their varying prices is questionable when factor based technology sets are used in data envelopment analysis dea in this scenario a value based technology becomes an appropriate reference technology against which efficiency can be assessed in this contribution the value based models of tone 2002 are extended in a directional dea set up to develop new directional cost and revenue based measures of efficiency which are then decomposed into their respective directional value based technical and allocative efficiencies these new directional value based measures are more general and include the existing value based measures as special cases these measures satisfy several desirable properties of an ideal efficiency measure these new measures are advantageous over the existing ones in terms of 1 their ability to satisfy the most important property of translation invariance 2 choices over the use of suitable direction vectors in handling negative data and 3 flexibility in providing the decision makers with the option of specifying preferable direction vectors to incorporate their preferences finally under the condition of no prior unit price information a directional value based measure of profit inefficiency is developed for firms whose underlying objectives are profit maximization for an illustrative empirical application our new measures are applied to a real life data set of 50 us banks to draw inferences about the production correspondence of banking industry

optimal market intelligence strategy when management attention is scarce this paper extends the theoretical literature on firms optimal information strategies to the situation when a firm s management attention capacity to process available data is scarce in this case a firm s optimal market intelligence strategy must trade off learning a little about a broad range of markets a broad strategy with gaining a very deep understanding of one or a few markets a focused strategy this trade off is not present when data are scarce an assumption made in most of the existing literature on optimal information search strategies however in data rich environments which are of increasing relevance given technology changes we show a focused market intelligence strategy is always best when managers need to process a substantial amount of data before beginning to gain insights i e there are increasing returns to attention interestingly this focused strategy can also be best with decreasing returns to attention when a managers are sufficiently efficient in processing the available data and b managers have sufficiently strong initial priors on the unknown market parameters we show a broad market intelligence strategy is only optimal when new data points are sufficiently redundant i e when the learning rate is sufficiently decreasing with the allocation of more attention our results also indicate that advances in information technology can account for the pressure on firms to become more focused and that competition increases the likelihood of a focused strategy competition can lead to asymmetric outcomes where firms focus on different markets finally we note that a focused market intelligence strategy and thus an asymmetric allocation of attention does not require a priori differences between firms markets or market specific core capabilities consequently a focused market intelligence strategy can result in market specific core competencies and produce firm differences from equivalent starting conditions