DUOPOLY INFORMATION EXCHANGE - THE CASE OF UNKNOWN SLOPE

We model information exchange between duopolists facing a common rando m demand. The slope of the common demand curve facing the firms is ass umed unknown, and firms observe private signals about this slope. We s how that, for sufficiently large variation in the demand slope, firms earn strictly higher profit when they share their information rather t han keeping it private - even with constant marginal costs and homogen eous goods. In this case, it is a Nash equilibrium for the duopolists to share their information in a quid pro quo information exchange. Con sistent with earlier models, information exchange raises welfare.