Two-stage game models of information acquisition in stochastic oligopolies
require the unrealistic assumption that firms observe the precision of
information chosen by their competitors before determining quantities. This
paper analyzes secret information acquisition as a one-stage game. Relative
to the two-stage game firms are shown to acquire less information. Policy
implications based on the two-stage game yield, therefore, too high taxes or
too low subsidies for research activities. For the case ...
Two-stage game models of information acquisition in stochastic oligopolies
require the unrealistic assumption that firms observe the precision of
information chosen by their competitors before determining quantities. This
paper analyzes secret information acquisition as a one-stage game. Relative
to the two-stage game firms are shown to acquire less information. Policy
implications based on the two-stage game yield, therefore, too high taxes or
too low subsidies for research activities. For the case of heterogeneous
duopoly it is shown that comparative statics results partly depend on the
observability assumption.
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