Information Transmission in Markets with Many Players (Limit Pricing; Oligopolies).

This dissertation consists of three essays. In the first two essays, I generalize the theory of limit pricing to oligopolies, and in the third essay, I develop refinements of Bayes Nash equilibria for signalling games with multiple signal senders. In the first essay, I analyze an oligopoly consisting of quantity choosing firms facing a potential entrant which observes the market price before making entry decision. It is shown that if there is information asymmetry between incumbent firms and the entrant, there could be limit pricing by oligopolists. There are two forms of limit pricing. In one form, incumbents raise the level of competition between them, producing more, when there is an entry threat. In the other form, the presence of an entry threat reduces the level of competition between incumbents which produce less. In the second essay, I consider another model of limit pricing in which incumbents choose prices which are observed by the entrant. In this model too, there are two forms of limit pricing by oligopolists, price lowering and price raising. Comparison of the two models shows that the feasibility and the scope of limit pricing by oligopolists depend upon the fineness of the signal that the entrant observes. In the first model in which the entrant observes only a statistic that summarized the actions chosen by incumbents, there exists no separating equilibrium. Consequently, incumbents limit price in some states of the industry, and their private information is never fully revealed. On the other h and , in the second model in which the entrant observes the actions chosen by incumbents directly, there are separating equilibria in which no limit pricing occurs, or even when it occurs, it does not limit entry. In the third essay, I develop several refinements of Bayes Nash equilibria for signalling games with multiple signal senders and employ them to check the stability of the equilibria in the entry models.PhDEconomic theoryUniversity of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/161697/1/8801382.pd