DISTRIBUTIONAL ASSUMPTIONS IN THE THEORY OF OLIGOPOLY INFORMATION EXCHANGE

We analyze the profitability of information sharing among Cournot olig opolists receiving private information about random demand. In this se tting, previous authors showed information exchange to be unprofitable when firms marginal costs are constant and outputs are perfect substi tutes, We introduce a measure of the increase in the accuracy of firms ' demand forecasts when information is shared, We provide two examples showing when this measure is large, information exchange is profitabl e, even though firms' marginal costs are constant and outputs are perf ect substitutes. Moreover, we show that in the linear-conditional-expe ctations framework, which has been standard in the literature, this me asure reveals these accuracy gains to be severely limited. (C) 1998 El sevier Science B.V. All rights reserved.