Error message

Deprecated function: Array and string offset access syntax with curly braces is deprecated in include_once() (line 20 of /mnt/web104/a0/07/510451407/htdocs/includes/file.phar.inc).

Continuous Time Contests with Private Information

Printer-friendly version
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
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.
Developed by Paolo Gittoi