We study incentives for information sharing (about uncertain future demand for final output) among firms in imperfectly competitive markets for farm output. Information sharing generally leads to increases in expected total welfare but may reduce expected firm profits. Even when expected firm profits increase, information sharing does not represent equilibrium behavior because firms face a prisoner’s dilemma in which it is privately rational for each firm to withhold information, given that other firms report truthfully. This equilibrium can be overcome if firms commit to simultaneously reporting their information and if reports are verifiable. We argue that agricultural bargaining associations serve both these roles.
This working paper was published as Hueth, Brent and Philippe Marcoul, "Information Sharing and Oligopoly in Agricultural Markets: The Role of the Cooperative Bargaining Association," American Journal of Agricultural Economics 88 (2006): 866–881, doi:10.1111/j.1467-8276.2006.00903.x.
Hueth, Brent M. and Marcoul, Philippe, "Information Sharing and Oligopoly in Agricultural Markets: The Role of Bargaining Associations" (2002). CARD Working Papers. 318.