Learning in asymmetric duopoly markets: competition in information and market correlation

This paper explores experimentation and learning in asymmetric duopoly markets with product differentiation and demand uncertainty. We define the concepts of strategic substitutability and strategic complementarity in information and we show how both the mode of information competition and the transmission of information across markets affect duopoly experimentation. We relate information competition with market competition and we find that, when goods are substitutes and the correlation between market shocks is negative, firms will have a higher incentive to experiment in asymmetric markets than in symmetric ones. The opposite result follows when such correlation is positive. Also, when goods are complements the above findings are reversed. Copyright Springer-Verlag Berlin/Heidelberg 2005