Information sharing between vertical hierarchies

When do competing principals independently choose to share the information obtained from their privately informed agents? Information sharing a¤ects contracting relationships within opponent organizations and induces players’strategies to be correlated via the distortions channel. We show that principals’incentives to share information depend on the nature of upstream externalities and the correlation of agents’ information: when externalities and correlation have opposite signs, there is a unique equilibrium in which principals share information; when externalities and correlation have the same sign, there is a unique equilibrium with no communication. In this second case, unlike with complete information, principals face a prisoners’dilemma since they obtain a higher total payo¤ by sharing information. JEL Classi…cation: D43, D82, L14.