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Cited by 284

The DOI matches its Crossref record; 56 of the 56 references it cites were found in a registry or an index.

Strategic Supply Function Competition With Private Information

Open access
·2011·Econometrica
DOI 10.3982/ecta8126
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Abstract

A finite number of sellers (n) compete in schedules to supply an elastic demand. The cost of each seller is random, with common and private value components, and the seller receives a private signal about it. A Bayesian supply function equilibrium is characterized: The equilibrium is privately revealing and the incentives to rely on private signals are preserved. Supply functions are steeper with higher correlation among the cost parameters. For high (positive) correlation, supply functions are downward sloping, price is above the Cournot level, and as we approach the common value case, price tends to the collusive level. As correlation becomes maximally negative, we approach the competitive outcome. With positive correlation, private information coupled with strategic behavior induces additional distortionary market power above full information levels. Efficiency can be restored with appropriate subsidy schemes or with a precise enough public signal about the common value component. As the market grows large with the number of sellers, the equilibrium becomes price-taking, bid shading is on the order of 1/n, and the order of magnitude of welfare losses is 1/n2. The results extend to inelastic demand, demand uncertainty, and demand schedule competition. A range of applications in product and financial markets is presented.

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Crossref · 10.3982/ecta8126

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Metadata

Venue
Econometrica
Publisher
The Econometric Society
Published
2011
Volume
79
Issue
6
Pages
1919-1966
ISSN
0012-9682 (ISSN-L)
DOI
10.3982/ecta8126
OpenAlex
W3122505440
Cited by
284
References
56
FWCI
19.51
Type
journal article
Language
en
Open access
bronze

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