We study the incentives to share private information ahead of contests, such as markets with promotional competition, procurement contests, or research and development (R&D). We consider the cases where firms have (i) independent values and (ii) common values of winning the contest. In both cases, when decisions to share information are made independently, sharing information is strictly dominated. With independent values, an industry-wide agreement to share information can arise in equilibrium. Expected effort is lower with than without information sharing. With common values, an industry-wide agreement to share information never arises in equilibrium. Expected effort is higher with than without information sharing.
Kovenock, D., Morath, F., and Münster, J. (2015) “Information Sharing in Contests,” Journal of Economics & Management Strategy, 24, pp. 570-596. DOI: 10.1111/jems.12105
Available for download on Thursday, July 27, 2017