Abstract
This long series of papers consist of three parts. Part I is concerned with the basic dual relations between the Cournot and Bertrand models. Part II begins to deal with the world of risk and uncertainty, with a discussion of the Cournot duopoly model with a common demand risk as a starting point. It then deals with other types of duopoly models with a common risk. Part III discusses more complicated problems such as private risks and oligopoly models. All these three parts taken together aim to carefully outline and critically evaluate the problem of information exchanges in oligopoly models, one of the most important topics in contemporary economics.
The true motivation of writing such survey papers is to strive for a synthesis of the economics of imperfect competition and the economics of imperfect information. The problem at issue is how and to what extent the information exchanges among firms influence the welfare of producers, consumers, and the whole society. It is seen in the paper that a definite answer to the problem really depends on the following many factors. (1) The type of competitors (Cournot-type or Bertrand-type), (2) the nature of risk (a common value or private values; demand risk or cost risk), (3) the degree and direction of physical and stochastic interdependence among firms, and (4) the number of firms. If any set of those factors is specified in a given oligopoly model, the welfare and policy implications may very systematically be derived by way of their decomposition into the following four effects. That is, (i) own variation effects, (ii) cross variation effects, (iii) own efficiency effects, and (iv) cross efficiency effect. In the real world, trade associations may be regarded as typical information exchange mechanisms. Many welfare implications obtained in the papers will shed a new light to the effectiveness and limitations of those trading groups.
This paper is a completely revised version of the opening part of Sakai (1989).
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Notes
- 1.
See Yasui (1979).
- 2.
The imperfect competition revolution took place in the 1930s, with J. Robinson (1933), Chamberlin (1933), and Stackelberg (1934) being its front runners. We would add to say that another equally important revolution−the imperfect information revolution−happened in the 1970s in which Arrow (1970), Akerlof (1970), Stiglitz (1975a, b), and Spence (1974) were primary promoters. The nature and significance of this new revolution was intensively discussed by Sakai (1982). For the economic thought of risk and uncertainty, see Sakai (2010).
- 3.
For instance, see Vives (1990, 1992, 1999, 2008). Kühn and Vives (1994), Sakai (1990), Sakai and Yamato (1990). All of those works on oligopoly and information were done on the mathematical basis of the theory of games with incomplete information (see Harsanyi (1967–1968)). And, they were also applied to the evaluation of industrial policies in the real economies (see Komiya (1975)).
- 4.
The theory of games was first established as the joint product of a born mathematician and a noted economist in von Neumann and Morgenstern (1944), and later developed by the “man with beautiful mind,” namely, Nash (1951). For its applications to oligopoly problems, see Shubik (1982), J.M. Friedman (1986), and more recent works by many others. Also see Marschack and Radner (1972).
- 5.
There is now a growing body of literature dealing with the working and performance of oligopoly markets under product differentiation, centering around the duality and efficiency comparison between Cournot and Bertrand equilibriums. For its earlier works, see Singh and Vives (1984), Vives (1984), Okuguchi (1986), and Sakai (1986). Also see Suzumura and Okuno-Fujiwara (1987).
- 6.
In the light of the history of economic thought, there have been so many ways of introducing risk and uncertainty into economic models. For details, see Sakai (2010).
- 7.
- 8.
See Gray-Bobo (1988), p. 20. Sakai is still remember how much he was excited when he read his paper on a new topic on the theory of oligopoly and information before the huge audience at the University of Bologna, Italy. Sakai really left his heart in the presumably oldest university in the world. We can surely learn new lessons from old teachings!
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Sakai, Y., Sasaki, K. (2021). Information Exchanges among Firms and Their Welfare Implications (Part I): The Dual Relations between the Cournot and Bertrand Models. In: Information and Distribution. New Frontiers in Regional Science: Asian Perspectives, vol 49. Springer, Singapore. https://doi.org/10.1007/978-981-10-0101-7_4
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