Distributional assumptions in the theory of oligopoly information exchange

We analyze the profitability of information sharing among Cournot oligopolists receiving private information about random demand. In this setting, previous authors showed information exchange to be unprofitable when firms' marginal costs are constant and outputs are perfect substitutes. We introduce a measure of the increase in the accuracy of firms' demand forecasts when information is shared. We provide two examples showing when this measure is large, information exchange is profitable, even though firms' marginal costs are constant and outputs are perfect substitutes. Moreover, we show that in the linear-conditional-expectations framework, which has been standard in the literature, this measure reveals these accuracy gains to be severely limited.