Majoritarian Preference, Utilitarian Welfare and Public Information in Cournot Oligopoly

Jaideep Roy, Randy Silvers, Ching-Jen Sun

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Abstract

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.
Original languageEnglish
Pages (from-to)269-288
Number of pages20
JournalGames and Economic Behavior
Volume116
Early online date28 May 2019
DOIs
Publication statusPublished - Jul 2019

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in Games and Economic Behavior. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Games and Economic Behavior, 116, (2019) DOI: 10.1016/j.geb.2019.05.005

© 2019, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

  • Collective Bayesian persuasion
  • Condorcet winner
  • Conflict
  • Cournot oligopoly
  • Majoritarian preference
  • Precision of public information
  • Uncertain costs

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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