Essays on Information EconomicsPublic Deposited
This dissertation explores topics in information economics. A particular focus in this dissertation is how competition affects incentives for information acquisition and information sharing between competitors. The first chapter studies a principal-agent setting where two principals compete for the services of one agent. The second chapter studies how competition in the product market affects firms' incentives to conduct market research. The third chapter highlights how asymmetric information affects technology licensing and firms' incentives to conduct their research and development activities. The first chapter studies a dynamic principal-agent model of adverse selection under competition among principals. Principals are ex-ante identical, but receive information about the agent independently which creates a setting of imperfect competition. I study how the agent's payoffs in this setting differ compared to the regular monopoly principal-agent case, and how that affects the agent's incentives to reveal information. The focus is on how the information structure affects the competition for the agent's services, and how the nature of competition in turn affects the agent's incentives. In a repeated setting with short term contracts and private observability of the agent's performance measure, the agent cannot be incentivized to fully reveal his private information as the familiar ratchet effect persists. Finally, I show that allowing voluntary information sharing among principals can benefit principals and improve welfare in general. In the second chapter, which is joint work with Colin Shopp, we apply the main result in Persico (2000), that decision-makers acquire more information when their payoffs are more risk-sensitive, to a duopoly model of Bertrand competition with uncertain demand following Vives (1984) in order to show how the amount of covert market research firms undertake depends on the level of competition. We decompose marginal returns to research into two effects, a competitive profit effect and a coordination effect, and show how each of these depends on competition. When the cost of market research is sufficiently high, the amount firms invest in market research is decreasing in the level of competition. In contrast, when the cost of market research is sufficiently low, firms perform the most market research at an intermediate level of competition. We partially extend this result to a public market research setting. The third chapter studies a duopoly pricing game where firms may have asymmetric information about their production technology. I show that having asymmetric information may lead to firms being unable to engage in profitable technology licensing, and how this problem is mitigated when firms outsource their research activities as opposed to conducting research in-house.