Strategic Information Acquisition.

This paper discusses the value of information in games with state contingent payoffs, using a simple two-stage duopoly model. In the first stage, each duopolist simultaneously chooses whether to observe the market demand, which is either high or low. The second stage game is an ordinary simultaneous-move duopoly game, where profits depend upon the state of demand. There, information acquisition in the first stage becomes strategically complemental if second-stage actions are strategic complements. In such a case, within a certain range of information acquisition cost profiles, there are multiple equilibria in one of which both duopolists acquire information in the first stage, in the other neither duopolist does. If actions in the second stage are strategic substitutes, then the information acquisition in the first stage becomes strategically substitutional. In this case, there is a range of information acquisition cost profiles where there exist multiple equilibria.