Disclosure policy for relative performance indicators under product market competition

Abstract

This study presents an optimal disclosure policy for relative performance indicators (RPIs) in quantity competition with asymmetric marginal costs. Our analysis shows that an asymmetric equilibrium arises under the specific economic environment, where a cost-efficient firm discloses information, while a cost-inefficient firm does not. Additionally, we evaluate the welfare effects of disclosure policies. Consequently, we find that the regulator should enforce non-disclosure for cost-inefficient firms in moderately-sized markets, as their behavior negatively impacts social welfare, even if they disclose the weight.