This paper studies a duopoly market in which firms can draw inferences concerning (uncertain) market demand from observations of their outputs and market price. Firms may adjust their outputs away from myopically optimal levels to affect the informativeness of the market price. Because firms’ quantities are observed, firms can manipulate the extent to which belief revision occurs rather than the direction in which beliefs are revised (as in signal-jamming models). We develop conditions and present examples under which the value of information is positive and negative and under which firms will increase or decrease quantity to manipulate information. Journal of Economic Literature Classification Numbers: D80, L13.
ASJC Scopus subject areas
- Economics and Econometrics