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Continuous Time Contests with Private Information

Article
Author/s: 
Christian Seel, Philipp Strack
Mathematics of Operations Research
Issue number: 
Vol. 41, Issue 3
Publisher: 
Informs
Year: 
2016
Journal pages: 
1093-1107
Journal article [1]
This paper introduces a class of contest models in which each player decides when to stop a privately observed Brownian motion with drift and incurs costs depending on his stopping time. The player who stops his process at the highest value wins a prize. We prove existence and uniqueness of a Nash equilibrium outcome and derive the equilibrium distribution in closed form. As the variance tends to zero, the equilibrium outcome converges to the symmetric equilibrium of an all-pay auction. For two players and constant costs, each player’s equilibrium profit decreases if the drift increases, the variance decreases, or the costs decrease.
Tags: 
Game Theory & Graphs [2]

Source URL:http://www.coalitiontheory.net/content/continuous-time-contests-private-information

Links
[1] http://pubsonline.informs.org/doi/abs/10.1287/moor.2015.0769 [2] http://www.coalitiontheory.net/research-areas/game-theory-graphs