The value of information in a simple duopoly model
Abstract This paper is concerned with the evaluation of information in a duopoly model in which the cost functions are subject to uncertainty. It explores how changes in information about the costs available to either firm affects the welfare of both firms along with the welfare of consumers. By comparing the ten possible types of information structures, it is shown that information may be detrimental, that improved information for one firm may or may not benefit the other firm and/or the consumer, and that it may be more desirable for a firm to gather information about the rival's cost rather than its own. All of these “irregular” results depend on the values of the variances of the costs and their correlation coefficient.