Information design and sensitivity to market fundamentals

Abstract

I apply persuasion to a linear-in-best-responses setup that encompasses Bertrand and Cournot Oligopolistic Competition games. Before the state of the world is realized, firms must design public signals regarding an individual payoff parameter. Full Disclosure enables companies to connect actions to states of the world at the expense of releasing crucial information to the competitors. On the other hand, Partial Revelation makes companies lose optimality of the decisions with regards to the state of the world but enable them to commit to an aggressive policy of preclusion that increases the frequency of a favorable distribution of players actions in the Cournot case; an informational entry deterrence mechanism. I show that linearity and the presence of interior solutions lead to Full Disclosure as a dominant strategy whereas obfuscation arises as an optimal policy when a firm has the capacity to take an opponent out of operation in the Cournot case.