Alliance Formation in Contests with Incomplete Information

Lars P. Metzger

No 544, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: This paper studies a contest in which players with unobservable types may form an alliance in a pre-stage of the game to join their forces and compete for a prize. We characterize the pure strategy equilibria of this game of incomplete information. We show that if the formation of an alliance is voluntary, players do not reveal private information in the process of alliance formation in any equilibrium. In this case there exists a pooling equilibrium without alliances with a unique effort choice in the contest and there exist equilibria in which all types prefer to form an alliance. If the formation of an alliance can be enforced by one player with positive probability there exists an equilibrium in which only the low types prefer to form an alliance.

Keywords: alliance formation; contest; incomplete information; free-riding; signalling (search for similar items in EconPapers)
JEL-codes: C72 D72 D74 D82 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cdm, nep-gth and nep-mic
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:544

DOI: 10.4419/86788622

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