טכניון מכון טכנולוגי לישראל
הטכניון מכון טכנולוגי לישראל - בית הספר ללימודי מוסמכים  
M.Sc Thesis
M.Sc StudentChokler Adi
SubjectInformation Advantage vs. Commitment Advantage in Linear
Bertrand Duopoly
DepartmentDepartment of Industrial Engineering and Management
Supervisors Professor Benyamin Shitovitz
Professor Kim Moshe


Abstract

There is extensive literature on the role of information in oligopolistic markets under uncertainty. This literature has focused attention on the incentives for information sharing, as well as on the value of the information. Few papers have studied how an information advantage can reflect on profits. Note that studying whether the information advantage has an impact on profits involves comparing the profits of firms with different information in the Bayesian equilibrium of a (fixed) game. In contrast, determining the value of information or the incentives for information revelation involves comparing the profits of a (given) firm in the Bayesian equilibria of different games. In this research we will focus on whether the information advantage reflects on profits in linear Bertrand duopolistic competition.
Consider a duopolistic industry in which firms set prices but are asymmetrically informed about the environment We ask whether, superior information gives a competitive advantage and therefore leads to higher profits. We will assume that Firm A has full information while Firm B has no information. This assumption implies that the information possessed by Firm A is superior. Firm A can set its price contingent on the state of nature while Firm B commits to a single price in all states of nature. The question is whether in any Bayesian equilibrium the ex-ante expected profits of Firm A are greater than or equal to those of Firm B
In Particular, we find a nontrivial subclass of linear Bertrand duopolies with an advantage for a commitment.