Shipwrecks and treasure hunters
Nicolas de Roos,
Vladimir Smirnov () and
Andrew Wait ()
Journal of Economic Dynamics and Control, 2018, vol. 90, issue C, 259-283
We examine dynamic search as a game in which two rivals explore (an island) for a hidden prize of known value. In every period until its discovery, the players decide how much of the unsearched area to comb. If a player finds the prize alone he wins it and the game ends. Players have a per-period discount factor and costs proportional to the area they search. First, as a benchmark for efficiency, we solve the one-player search problem. Second, in the two-player setting we show that typically there is inefficient over-search – a result akin to the tragedy of the commons. However, for players with intermediate levels of patience, there is the possibility of inefficient under-search as players incorporate the expected future payoffs in their current search decisions. Finally, with patient players, several counterintuitive results can arise: for example, players might be better off searching a larger island or looking for a less valuable prize.
Keywords: R&D; Search; Uncertainty (search for similar items in EconPapers)
JEL-codes: D21 O32 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:90:y:2018:i:c:p:259-283
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