Cooperation in a differentiated duopoly when information is dispersed: A beauty contest game with endogenous concern for coordination

Camille Cornand (1) , Rodolphe dos Santos Ferreira (2)

1 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne
2 BETA - Bureau d'Économie Théorique et Appliquée

The paper contribution is twofold. It introduces heterogeneous information in a strategic delegation game of a differentiated oligopoly with price competition and it thus provides a micro-founded illustration of a beauty contest, in which the relative weight put on the competition motive of the payoffs is not exogenous but may be manipulated by the players. The conflict between the competition and the fundamental motives, already present in an oligopolistic setting under perfect information, is exacerbated when information is dispersed. A conflict arises also in this case between the competition and the coordination motives, ending up in the undervalueing of public information. We show how firm owners ease these conflicts by opting for some cooperation, thus moderating the competitive toughness displayed by their managers. By doing so, they also enhance the managers' concern for coordination and consequently heighten the weight put on public relative to private information.

Mots clés: Beauty contest; Competition; Cooperation; Coordination; Delegation game; Duopoly with heterogeneous information

Domaines: Economies et finances

Camille Cornand, Rodolphe dos Santos Ferreira. Cooperation in a differentiated duopoly when information is dispersed: A beauty contest game with endogenous concern for coordination. Mathematical Social Sciences, 2020, 106, pp.101-111. ⟨10.1016/j.mathsocsci.2020.02.003⟩. ⟨halshs-02949201⟩