Information Acquisition Behavior: An Evolutionary Game Theory Perspective
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This paper explores the retailers’ information acquisition behavior under horizontal competition and investigates the impact of information leakage from an evolutionary game theory perspective. When information leakage does not occur, we find that firms’ acquisition behavior differ under different types of competition. Under Cournot competition, rivals prefer the competitor not to acquire information. Under Bertrand competition, however, rivals prefer the competitor to acquire information. As a result, at a moderate level of acquisition cost mixed strategies (acquire and not acquire) coexist under Cournot competition, whereas all retailers adopt the same (pure) strategy under Bertrand competition. With information leakage, two effects (collaborative forecasting and free-riding) influence firms’ decision making. When the collaborative forecasting effect dominates, all retailers would choose the acquisition strategy in the equilibrium. However, if the free-riding effect is strong, no retailer would acquire information in the equilibrium. With a moderate acquisition cost, there are still retailers willing to acquire information and mixed strategies coexist, regardless of the type of competition. Interestingly, no matter information is leaked or not, we find that Cournot competition in general better accommodates information acquisition than Bertrand competition. As a result, Cournot competition can lead to a higher total welfare than Bertrand competition when the information acquisition cost is moderate and the demand uncertainty is large, in contrast to the standard result of duopoly models.
KeywordsInformation acquisition Leakage Evolutionary game
The authors are grateful to the associate editor and the anonymous referees for their constructive feedback. This research is supported by China Scholarship Council (Grant No. 201506020047), National Natural Science Foundation of China (Grant Nos. 71632003, 71471101), Natural Sciences and Engineering Research Council of Canada (Grant No. 312572) and Social Sciences and Humanities Research Council of Canada (Grant No. 00657).
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Conflict of interest
The authors declare that they have no conflict of interest.
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