The Effects of the Asymmetry of Information Intrafirms on Oligopolistic Market Outcomes

We consider an oligopoly with a principal-agent relationship, in which a firm's marginal cost is decreasing in a manager's managerial effort and is subject to an additive uncertainty. Two types of firms operate: one displays symmetric information between the owner and the manager, another presents asymmetric information. We show that if the marginal cost's derivative of the manager is sufficiently small, then the expected effort level in an asymmetric information firm exceeds that in a symmetric one. We also show that the expected total output and consumer surplus may reduce at equilibrium, as the number of symmetric information firms increases.