Strategic Disclosure of Demand Information by Duopolists: Theory and Experiment

Abstract

We study the strategic disclosure of demand information and product-market strategies of duopolists. In a setting where firms may fail to receive information, we show that firms selectively disclose information in equilibrium in order to influence their competitor’s product-market strategy. Subsequently, we analyze the firms’ behavior in a laboratory experiment. We find that subjects often use selective disclosure strategies, and this finding appears to be robust to changes in the information structure, the mode of competition, and the degree of product differentiation. Moreover, subjects in our experiment display product-market conduct that is largely consistent with theoretical predictions.