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Information sharing, information free-riding and capital structure in oligopolies

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>1/01/1999
<mark>Journal</mark>International Journal of Industrial Organization
Issue number1
Volume17
Number of pages27
Pages (from-to)109-135
<mark>State</mark>Published
Early online date21/10/98
<mark>Original language</mark>English

Abstract

We study the effect of capital structure decisions on the incentives for firms in a duopoly to share information through a trade association. Focusing on the case of Cournot competition with demand uncertainty, we find that the standard result for all-equity firms that information will not be shared may be reversed. When one firm has better access to information than the other, leverage may be a way for the latter firm to free-ride on the former firm's information. With ex ante symmetric firms, a trade association will be formed even if information sharing does not occur.