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Majoritarian preference, utilitarian welfare and public information in Cournot oligopoly

journal contribution
posted on 01.07.2019, 00:00 authored by Jaideep RoyJaideep Roy, Randolph Silvers, Ching-Jen SunChing-Jen Sun
Can individual preferences for public information among heterogeneous consumers be aggregated into a meaningful social preference that does not suffer from Condorcet cycles? In a Cournot model where homogeneous producers observe a public signal about an uncertain cost of production prior to taking quantity decisions, we show that the majoritarian preference of consumers for the precision of public information is fairly well behaved so that a Condorcet winner always exists. Under a monotonicity condition on the demand function, we characterize the Condorcet-winning precision in terms of the demand function and the number of firms under which the Condorcet-winning precision (i) hurts consumers' surplus and profits or (ii) remains conflict-free. These results have interesting implications on ‘collective’ Bayesian persuasion by agencies representing consumers, showing that when full transparency maximizes expected consumers' surplus, collective Bayesian persuasion can lead to full opacity, and vice versa.

History

Journal

Games and economic behavior

Volume

116

Pagination

269 - 288

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

0899-8256

eISSN

1090-2473

Language

eng

Publication classification

C1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2019, Elsevier Inc.