Bobtcheff, Catherine, Levy, Raphaël and Mariotti, Thomas (2021) Information disclosure in preemption races:Blessing or (winner's) curse? TSE Working Paper, n. 21-1202, Toulouse

Preview

Text Download (726kB) | Preview

Abstract

Firms receiving independent signals on a common-value risky project compete to be
the first to invest. When firms are symmetric and competition is winner-take-all, rents
are fully dissipated in equilibrium and the extent to which signals are publicly disclosed
is irrelevant for welfare. When disclosure of signals is asymmetric, welfare is highest
when firms are most asymmetric, and policies that uniformly promote disclosure may
backfire, especially when competition is severe. When firms strategically select their
disclosure policies, a moderate subsidy for disclosure induces a low correlation between
firms’ policies, and thus maximizes welfare.