Information Acquisition and Relative Efficiency of Competitive, Oligopoly and Monopoly Markets
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This paper analyzes the relative efficiency of a competitive equilibrium against Cournot oligopoly and monopoly equilibria when firms have diverse private information about the stochastic market demand. When firms have information of the same precision, the competitive equilibrium yields a larger expected welfare. However, when information is costly, Cournot oligopoly and monopoly firms acquire more information, and hence may yield a larger expected welfare than the competitive firms under certain conditions. We also find that competitive firms acquire less than the efficient level of information, while Cournot oligopoly and monopoly firms may acquire more than the efficient level.
