An Economic Analysis of Collaboration Between Gompeting Firms
JOURNAL ARTICLE
Cite JOURNAL ARTICLE
Style
Format
An Economic Analysis of Collaboration Between Gompeting Firms
Credit and Capital Markets – Kredit und Kapital, Vol. 37 (2004), Iss. 2 : pp. 202–222
Additional Information
Article Details
Author Details
Eberhard Stickel, Bonn
References
-
Choudhoury, V., Sampler, J.: Information Specifity and Environmental Scanning: An Economic Perspective. MIS Quarterly 21, No. 1, 1997, pp. 25-53.
Google Scholar -
Clemons, E.: Evaluation of Strategic Investments in Information Technology. Comm. of the ACM 34, No. 1, 1991, pp. 22-36.
Google Scholar -
Clemons, E., Kleindorfer, P.: An Economic Analysis of Interorganizational Information Technology. Decision Support Systems 8, 1992, pp. 431-446.
Google Scholar -
Clemons, E., Reddi, S. Row, M.: The Impact of Information Technology on the Organization of Economic Activity - The “Move to the Middle” Hypothesis. Journal of Management Information Systems 10, No. 2, 1993, pp. 9-35.
Google Scholar -
Copeland, T., Weston, J.: Financial Theory and Corporate Policy. 2nd Ed., Reading, MA. (1983).
Google Scholar -
Fried, D.: Incentives for Information Production and Disclosure in a Duopolistic Environment. Quarterly Journal of Economics 99, 1984, pp. 367-381.
Google Scholar -
Gal-Or, E.: Information Sharing in Oligopoly. Econometrica 53, No.2 , 1985, pp. 329-343.
Google Scholar -
Gal-Or, E.: Information Transmission - Cournot and Bertrand Equilibria. Review of Economic Studies 53, 1986, pp. 85-92.
Google Scholar -
Hviid, M.: Risk-Averse Duopolists and Voluntary Information Transmission. Journal of Industrial Economics 38, No. 1, 1989, pp. 49-64.
Google Scholar -
Jin, J.: Information Sharing Through Sales Report. Journal of Industrial Economics 42, No. 3, 1994, pp. 323 333.
Google Scholar -
Kao, J., Hughes, J.: Note on Risk Aversion and Sharing of Firm-Specific Information in Duopolies. Journal of Industrial Economics 41, No. 1, 1993, pp. 103-112.
Google Scholar -
Kettinger, W., Grover, V., Guha, S.: Strategic Information Systems Revisited: A Study in Sustainability and Performance. MIS Quarterly 18, No. 1, 1994, pp. 31-58.
Google Scholar -
Klemperer, P., Meyer, M.: Price Competition vs. Quantity Competition: The Role of Uncertainty. Rand Journal of Economics 17, No. 4, 1986, pp. 405-415.
Google Scholar -
Li, L.: Cournot Oligopoly with Information Sharing. Rand Journal of Economics 16, No. 4, 1985, pp. 521-536.
Google Scholar -
Martin, S.: Industrial Economics. New York (1988).
Google Scholar -
Palfrey, T. R.: Risk Advantages and Information Acquisition. Bell Journal of Economics 13, No. 1, 1982, pp. 219-224.
Google Scholar -
Pindyck, R., Rubinfeld, D.: Microeconomics. Ed., New York (1992).
Google Scholar -
Rasmussen, E.: Games and Information. An Introduction to Game Theory. 2nd Ed., Oxford UK (1995).
Google Scholar -
Williamson, O.: Markets and Hierarchies - Analysis and Antitrust Implications. New York (1975).
Google Scholar
Abstract
An Economic Analysis of Collaboration Between Competing Firms
To understand adoption of collaborative systems, it is of great importance to know about economical effects of collaboration itself. Decision makers should be able to value potential drawbacks and advantages of collaboration. Based on this estimation, the potential of collaborative technology may be determined. Throughout the paper we are interested in the effects of collaboration across a firm’s boundary. There is vast literature on economical effects of collaboration among companies situated along different phases of the value chain. At least in economical terms this seems to be a well understood problem. The situation is different with respect to collaboration between competing companies. Strategies of firms may be seen as a mixture of cost reduction, product differentiation and improvement of decision making and/or planning. In this context information technology may help a firm to create sustaining competitive advantages over competitors. It is less clear whether collaboration is of any use in such an environment. According to the economics literature, the most important factors affecting benefits of collaboration are market structure, kind and degree of uncertainty faced by the firms, their risk preferences and the type(s) of product(s) offered (homogeneous or het- erogeneous products). The results reported depend on the way these factors are combined. They partially contradict each other. In this paper we will analyze the most relevant case of an oligopoly with differentiated products, demand uncertainty and risk averse managers. This combination has not yet been examined in detail, although it is the most realistic case. We will present a microeconomic model and use techniques from game theory for the analysis. The way the model is constructed will allow the derivation of closed-form solutions. Results indicating whether collaboration in various areas makes sense will be obtained. This makes it possible to judge the potential of available collaborative technology. The simple model presented may be extended in a variety of ways. Some directions for possible generalization are indicated. (JEL CO, C70, L10)