Entry with two correlated signals: the case of industrial espionage and its positive competitive effects
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https://doi.org/10.1007/s00182-020-00748-8 |
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Title
Entry with two correlated signals: the case of industrial espionage and its positive competitive effectsDate
2021-01-07Publisher
Springer; Physica VerlagISSN
0020-7276; 1432-1270Bibliographic citation
Barrachina, A., Tauman, Y. & Urbano, A. Entry with two correlated signals: the case of industrial espionage and its positive competitive effects. Int J Game Theory 50, 241–278 (2021). https://doi.org/10.1007/s00182-020-00748-8Type
info:eu-repo/semantics/articlePublisher version
https://www.springer.com/journal/182Version
info:eu-repo/semantics/publishedVersionAbstract
Recent advances in information and communication technologies have increased the incentives for firms to acquire information about rivals. These advances may have major implications for market entry because they make ... [+]
Recent advances in information and communication technologies have increased the incentives for firms to acquire information about rivals. These advances may have major implications for market entry because they make it easier for potential entrants to gather valuable information about, for example, an incumbent’s cost structure. However, little theoretical research has actually analyzed this question. This paper advances the literature by extending a one-sided asymmetric information version of Milgrom and Roberts’ (1982) limit pricing model. Here, the entrant is allowed access to an intelligence system (IS) of a certain precision that generates a noisy signal on the incumbent’s cost structure. The entrant thus decides whether to enter the market based on two signals: the price charged by the incumbent and the signal sent by the IS. Crucially, for intermediate values of IS precision, the set of pooling equilibria with ex-ante profitable market entry is non-empty. Moreover, the probability of ex-ante non-profitable entry is strictly positive. In classical limit pricing models, an entrant never enters in a pooling equilibrium, so this result suggests that the use of an IS may potentially increase competition. [-]
Is part of
International Journal of Game Theory volume 50, pages241–278(2021)Funder Name
Ministerio de Economía y Competitividad | European Feder Funds | Ministerio de Ciencia, Innovación y Universidades (Spain) | Generalitat Valenciana
Project code
ECO2016-75575-R | PID2019-110790RB-I00 | PROMETEO 2019/095 | ECO2017-85746-P
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Copyright © 2021, Springer-Verlag GmbH Germany, part of Springer Nature
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