Monopoly, competition and information acquisition

Magdalena Dimitrova, Edward Schlee

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

An incumbent monopolist is uncertain about its linear demand, but can acquire public information at a cost. We determine how an entry threat affects the firm's information acquisition. If returns to scale are constant and the state-contingent demands become more dispersed as output increases, then entry reduces information acquisition. If, however, either the incumbent or entrant has increasing returns; or if the state-contingent demands are nonlinear or fail increasing dispersion, then entry can increase information. Finally, entry can hurt consumers. Although entry always increases output, it can decrease information. Consumers sometimes prefer a better informed monopoly to a duopoly.

Original languageEnglish (US)
Pages (from-to)1623-1642
Number of pages20
JournalInternational Journal of Industrial Organization
Volume21
Issue number10
DOIs
StatePublished - Dec 1 2003

Keywords

  • Competition
  • Information acquisition
  • Welfare

ASJC Scopus subject areas

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering

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