Continuous time contests with private information

C. Seel, P. Strack

Research output: Contribution to journalArticleAcademicpeer-review

205 Downloads (Pure)

Abstract

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.
Original languageEnglish
Pages (from-to)1093-1107
Number of pages15
JournalMathematics of Operations Research
Volume41
Issue number3
DOIs
Publication statusPublished - Aug 2016

Keywords

  • Contests
  • all-pay contests
  • silent timing games
  • OPTIMAL STOPPING TIME
  • ALL-PAY AUCTION
  • DYNKIN GAMES
  • EQUILIBRIUM

Cite this