Information Sharing in Cournot Competition, a seminar by Dr Liu Yang (Tsinghua University)

Information Sharing in Cournot Competition

Abstract

In the digital economy, platforms and consortia increasingly facilitate information sharing among competing firms. However, such collaboration can intensify competition and reduce overall resource allocation efficiency. This paper studies how to design information-sharing mechanisms in a Cournot competition setting where firms possess private signals on an uncertain market demand. An information designer, such as a digital platform or a consortium, is able to collect these private signals and send tailored messages to influence firms' production decisions. We formulate this information design problem as a linear program, and develop upper bounds based on dual feasible solution. Our results show that full information sharing maximizes social welfare and consumer surplus. In contrast, to maximize the total profit, we refine the upper bound using a semi-definite programming formulation, and construct a partial sharing mechanism based on granting all information to a single firm randomly selected from those ex-ante best-informed ones. The closeness between the upper and lower bounds demonstrates that both perform very well. The result also illustrates a key insight on partial information sharing to improve total profit: create high ex-ante information asymmetry among the competing firms.

About the Speaker

YANG Liu is a tenured Associate Professor in the Management Science area at the School of Economics and Management, Tsinghua University. Her research focuses on information acquisition and learning issues, incentive issues, and behavioral issues in decision-making problems under uncertainty. Professor Yang has published many articles in leading business journals, including Operations Research and Manufacturing & Service Operations Management (M&SOM).