Working Paper BETA #2002-03

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Title : Partial Certifiability and Information Precision in a Cournot Game

Author(s) : Frédéric KOESSLER

Abstract : This paper examines strategic information revelation in a Cournot duopoly with incomplete information about firm~1's cost and information precision. Firm~2 relies on certifiable and ex post submissions of firm~1, without necessarily knowing whether firm~1 knows its cost or not. The sequential equilibria of the induced communication game are determined for different certifiability possibilities. A perfectly cevealing equilibrium in which information precision is irrelevant is obtained under full certifiability. On the contrary, it is shown that if only payoff-relevant (fundamental) events can be certified, then the equilibrium output and profit of firm~1 decreases with its average information precision if this firm is uninformed or if its cost is high. A consequence of this local effect is that information precision has, on average, no value for a firm.

Key-words : Strategic information revelation; Information precision; Cournot competition; Cost uncertainty; High

JEL Classification : C72; D43; D82; L13.