Limited capacity in project selection: competition through evidence production

Raphael Boleslavsky () and Christopher Cotton
Additional contact information
Raphael Boleslavsky: University of Miami

Economic Theory, 2018, vol. 65, issue 2, No 7, 385-421

Abstract: Abstract An organization must decide which of two proposals to fund. In evaluating the proposals, the organization relies on the agents applying for funding to produce evidence about the merits of their own proposals. When the organization can fund all proposals, each agent engages in an independent game of Bayesian persuasion with the organization, choosing information strategies that maximize the probability of producing evidence in favor of funding. When the organization has limited capacity to implement proposals, the game becomes one of competitive Bayesian persuasion. Producing favorable evidence is not enough to secure funding; an agent must also produce more-favorable evidence than the other agent. We show that an organization’s limited capacity leads agents to produce more (Blackwell) informative evidence than they do when the organization is unconstrained. We fully characterize the unique equilibrium under unlimited and limited capacity, and show that unless the prior strongly favors accepting both proposals, the funding organization is better off when its capacity is limited. The analysis highlights similarities between competitive Bayesian persuasion games and all-pay auctions and generalized Colonel Blotto games.

Keywords: Search for evidence; Lobbying; Project selection; Competitive Bayesian persuasion; All-pay auction; General Lotto game (search for similar items in EconPapers)
JEL-codes: D72 D78 D83 L15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
http://link.springer.com/10.1007/s00199-016-1021-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Limited Capacity In Project Selection: Competition Through Evidence Production (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:65:y:2018:i:2:d:10.1007_s00199-016-1021-0

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-016-1021-0

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().