ASYMMETRIC INFORMATION AS A COMMITMENT IN OLIGOPOLY

In this paper we show that in an oligopolistic industry that consists of identical firms, a subset of firms may find it optimal to commit to face asymmetric information about their agents' operations. Therefore some firms may choose to incur informational agency costs, even thoug h information is available at no cost. The commitment to face asymmetr ic information is also a commitment on the part of the firm not to ext ract the entire agent's surplus and so agents have incentive to make a specific investment that increases firms' expected profits. The level of this investment increases with the proportion of firms that are no t informed.