Oligopoly, information and welfare (Q1118512)

This paper deals with the situation of idiosyncratic risks to explore how and to what extent information sharing among Cournot oligopolies affects the welfare of producers, of consumers, and of the whole society. The paper differs from the previous work in that it is not restricted to those special cases in which goods are just homogeneous or stochastically independent. It is shown among other things that the welfare implications of information pooling are quite sensitive to the number of participating firms. Whereas information sharing is harmful to consumers as outsiders if the number of firms is ``small'', it may become beneficial to them if the number is ``large''. This result may be compared to Selten's famous model of imperfect competition where four are ``few'' and six are ``many''. The results obtained in this paper are expected to have policy implications regarding the desirability of information sharing.