TY - JOUR
T1 - Asymmetric information as a commitment in oligopoly
AU - Barros, Fátima
N1 - Funding Information:
I am grateful to Jacques Cremer, Jacques Thisse and two anonymous referees for helpful comments. Financial support from EEC Commission (S.P.E.S.) is gratefully acknowledged.
PY - 1997/2
Y1 - 1997/2
N2 - In this paper we show that in an oligopolistic industry that consists of identical firms, a subset of firms may find it optimal to commit to face asymmetric information about their agents' operations. Therefore some firms may choose to incur informational agency costs, even though information is available at no cost. The commitment to face asymmetric information is also a commitment on the part of the firm not to extract the entire agent's surplus and so agents have incentive to make a specific investment that increases firms' expected profits. The level of this investment increases with the proportion of firms that are not informed.
AB - In this paper we show that in an oligopolistic industry that consists of identical firms, a subset of firms may find it optimal to commit to face asymmetric information about their agents' operations. Therefore some firms may choose to incur informational agency costs, even though information is available at no cost. The commitment to face asymmetric information is also a commitment on the part of the firm not to extract the entire agent's surplus and so agents have incentive to make a specific investment that increases firms' expected profits. The level of this investment increases with the proportion of firms that are not informed.
KW - Asymmetric information
KW - Internal organization
KW - Managerial incentives
UR - http://www.scopus.com/inward/record.url?scp=0030874592&partnerID=8YFLogxK
U2 - 10.1016/S0014-2921(95)00129-8
DO - 10.1016/S0014-2921(95)00129-8
M3 - Article
AN - SCOPUS:0030874592
SN - 0014-2921
VL - 41
SP - 207
EP - 225
JO - European Economic Review
JF - European Economic Review
IS - 2
ER -