Disclosure of Investment Information in Multiple Markets

Abstract

We study the effect of disclosure on firms' investment decisions when a firm competes with an identical competitor in (two) multiple markets and with limited investment resources. We focus on the case where the information disclosure environment may differ by each market. Consistent with previous research in a single Cournot competition, our results show that firms exert more aggressive investments under disclosure than under nondisclosure in symmetric disclosure environments. Our results also show, however, that firms exert less aggressive investments in a disclosure market than in a nondisclosure market if each market has an asymmetric disclosure environment. This stems from the fact that firms must concentrate their limited investment resources on a less competitive market, and multimarket contact allows firms to predict rival firm's competitive behavior.