Sharing cost information: A counterexample (Q1341459)

Contrary to prior results, firms may not gain from an agreement to share information about their costs of production when one or more firms may shut down for some realizations of costs. Suppose cost uncertainty is the result of the introduction of an uncertain innovation, and that a successful innovation is drastic (reduces cost so much that nonadopters must shut down). Then for high enough probabilities of success, firms will not share information about costs because a nonadopter will shut down, whether the innovation is known to be a success or not.