Imitation in location choice

Figure 3: Binary information acquisition decisions as a function of inverse cost of information
(x-axis) and the fixed precision of the private signal (y-axis): Environments in which neither
firm acquires private information (unshaded), Firm 1 acquires private information and Firm 2
does not (lightly shaded), and both firms acquire private information (darkly shaded)

4tttmtttttttttt»tttttttt»t»ttttttttmtttttttt»t
ii HH Ht HJ HJ Ht HJ JH Ht HJ HI JH Ht IH HJ ttt Ht t
,tttttttmtttttttttmttttttm*ttttttttmtttttttt∙t
ttttttttttttttttttttttttttttttttttttttttttttttttttttt.
Ht JH JJH Ht Ht Ht JH Ht JH JH Ht JH t H Ht Ht Ht Ht Ht J
.BtnttttttBmttttttmnttttttMtHttttttBmtttntt
.HHtHtHHlHHtHHHHtHHHHtHHHHtlHHtHtlHt
:tt -
.JtH JtJHJtJHtJtJH JJJtH JtJHJtH JtJHtJJJ JHtJtJH JHtJtJ
.ttttt ttt ttt tttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt tttt
÷tHJJH JHHJJJH Hi JHHJJH HJHJJH HJ JHJHJH Hi JH JH HiJ
.tt Htttttttttttttttttttt Httttttttttttttttttttttttt Ittttttttttt ■
.ttt ttt Ht Ht Ht нн ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt Ht Itttttttttttt
н JHHJJH hjhjjjh Hi JHHJJH HJHJJH HJ JHJHJH Hi JH JH ни
ttt ttt Httttttt Htttttttt ttt Httttttt Httttttt ttt tttttt ttt Htttttttt
нннннннннннннннннннннннннннннннннн.
ttttt ttt ttt ttt ttt Ht tttt ttt ttt ttt ttt ttt Ht ttt ttt Ht ttt ttt ttt Ht ttt Htt
.IiiHiiHHiiiiiHHiiiiiHiiHHiiiiiHHiiiiiHHiHiiiiHiiHiiiHii

.ttt                                                      ....Httttttt

.ttt                                         HtHttttttttttHttttttt

till                     ннннннннннннннннн

HH                             ... Ht Ht Ht Ht Ht Ht Ht ttt Ht Ht ttt t

лнннннннннннннннннннннннннннннннннннннн

.t ttt Ht Ht ttt Ht ttt Ht Ht Ht Htt ttt Ht ttt Ht Ht Ht Ht Ht Ht Ht Ht ttt Ht Ht Htt
j t. .н JJ J JJ JJ Hi J JJ JJ J JJ J JH JJ J JJ J JH JJ J J JJ J JJ Hi J JJ J JJ Hi г
.t ttt ttt Ht ttt ttttt: ..ttt ttt Ht tttt ttt Ht ttt ttt ttt Ht ttt ttt Ht Ht ttt ttt Ht ttt tttt
hl. ttJjjjjjjJHJjjjjjJHiJjjjjjjjjJHJjjjjjJH JHJJJ JJJHiJJJ JHiHJ
tttt ttt ttttt ..ttt Ht Ht ttt ttt Ht tttt ttt Ht Ht ttt ttt Ht ttt ttt Ht ttt ttt ttt Ht ttt tttt

H .tttttttHttttttttttHttttttttHttttttttttHtttttttHttttttttttHtttttttг
Jhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhihhhhh
ttttt: .ttttt Ht ttt ttt Ht Ht ttt ttt Ht tttt ttt Ht Ht ttt ttt Ht ttt ttt Ht Ht ttt ttt Ht ttt tttt
.HJJ .HJHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHtHHHHHH
. ttt ttt Ht ttt ttt Ht ttt ttt ttt ttt ttt ttt ttt tttt ttt ttt ttt ttt ttt ttt ttt ttt ttt Ht ttt ttt ttt ttt ttt г
.JJ tJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
t .ttttttHtttttttHtttttttttttttttttttttttttttttttttttttttttttttttttttttHttttttttttttttttt
JjHJHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH
.tttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt tttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt г
ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt tttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt tttt
HIHHt HIIHHI HIIHHI HIIHHJHJIHHHHHHIHHJHJIHHHHIHHHH JHJtJIHHJJtJIHI
ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt tttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt ttt tttt

О 0.1     0.2    0.3    0.4    0.5    0.6    0.7    0.8    0.9     1

Figure 3 shows a partition of the universe of possible environments, indexed by the inverse
relative cost of information and fixed precision of the available signal. Firms make discrete
choices of whether to acquire the signal. Whether firms acquire the signal depends on the
signal's cost, its (fixed) quality, and--most importantly--whether the firm is first mover or not.
In the unshaded region, neither firm acquires information because costs of information are
high relative to the cost savings in deviating from the ideal location a. In the darkly shaded
region, both firms acquire information because information costs are relatively low. In the
lightly shaded region, however, Firm 1 acquires information but Firm 2 does not. This
difference is purely the result of first- and second-mover status, as Firm 2 would have
acquired the signal had it not been able to freely extract information by observing Firm 1's
location.

<<   37   38   39   40  

More intriguing information