Incentives for information sharing in duopoly with capacity constraints

We study the ex ante incentives for firms to share their private information in a Cournot duopoly with capacity constraints. In both demand and cost information sharing games, we show that the incentives can be reversed when some equilibrium solutions are binding on capacity. Especially, we identify some conditions under which partial information sharing is the dominant strategy under both games. Numerical examples are provided for illustration. In addition, we show that information sharing does not necessarily increase social welfare. (C) 2007 Elsevier Ltd. All rights reserved.