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American Economic Journal: Microeconomics: Vol. 4 No. 4 (November 2012)

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Competition, Comparative Performance, and Market Transparency

Article Citation

Carlin, Bruce I., Shaun William Davies, and Andrew Iannaccone. 2012. "Competition, Comparative Performance, and Market Transparency." American Economic Journal: Microeconomics, 4(4): 202-37.

DOI: 10.1257/mic.4.4.202

Abstract

We study how competition affects market transparency, taking into account that comparative performance is assessed via tournaments and contests. Extending Dye (1985) to a multi-firm setting in which top performers are rewarded, we show that increased competition usually makes disclosure less likely, which lowers market transparency and may decrease per capita welfare. This result appears to be robust to several model variations and as such, has implications for market regulation. (JEL D82, D83, L77, L25)

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Authors

Carlin, Bruce I. (UCLA)
Davies, Shaun William (UCLA)
Iannaccone, Andrew (UCLA)

JEL Classifications

D82: Asymmetric and Private Information; Mechanism Design
D83: Search; Learning; Information and Knowledge; Communication; Belief
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L25: Firm Performance: Size, Diversification, and Scope

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