Search without observability
Vladimir Smirnov () and
Andrew Wait ()
No 2019-04, Working Papers from University of Sydney, School of Economics
We analyze a search game in which multiple agents search an area (an island) for a hidden prize of known value. In every period until discovery, the rivals decide where and how much of the unsearched island to explore. The game ends when a player or players discover the prize. If one player discovers the prize on their own, they alone enjoy the spoils. Players have a per-period discount factor and costs proportional to how much they search. We compare two cases when: (i) the search of rivals (past and present) is observable to all; and (ii) players cannot observe others’ previous and current search. We show that welfare in the unique SMPE with observability is always (weakly) higher than in the case without observability. However, we show that there is a self-enforcing mechanism without observability in which a third party ex ante allocates search zones to each of the players that ensures the same outcome is achievable as with observability. Our results have implications for the design of search games (patents, prizes, information sharing, and so on) by regulators.
Keywords: search; uncertainty; regulatory design. (search for similar items in EconPapers)
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