Trade association disclosure rules, incentives to share information, and welfare

TLDR: In this article, the authors propose a monopolistic competition framework to analyze the effects of different disclosure rules used by trade associations on the incentives to share information and on the welfare of consumers, firms, and society.

Abstract: In this article I propose a monopolistic competition framework to analyze the effects of different disclosure rules used by trade associations on the incentives to share information and on the welfare of consumers, firms, and society. This framework is appropriate whenever a single firm cannot influence aggregate market magnitudes, and serves as a benchmark for the analysis of information-pooling agreements abstracting from strategic considerations. I report two main results. First, a policy of nonexclusionary disclosure destroys the incentives to share information, while exclusionary disclosure preserves them. Second, information sharing increases expected total surplus with Cournot competition but decreases it with Bertrand competition in the context of a Quadratic-Normal model with demand uncertainty.