Monday, March 15, 2010
Posted by D. Daniel Sokol
Catherine Bobtcheff (Toulouse School of Economics) and Thomas Mariotti (Toulouse School of Economics) have posted Potential Competition in Preemption Games.
ABSTRACT: We consider a preemption game with two potential competitors who come into play at some random secret times. The presence of a competitor is revealed to a player only when the former moves, which terminates the game. We show that all perfect Bayesian equilibria give rise to the same distribution of players' moving times. Moreover, there exists a unique perfect Bayesian equilibrium in which each player's behavior from any time on is independent of the date at which she came into play. We find that competitive pressure is nonmonotonic over time, and that private information tends to alleviate rent dissipation. Our results have a natural interpretation in terms of eroding reputations.