Treasure game

Alexander Matros and Vladimir Smirnov

No 2011-10, Working Papers from University of Sydney, School of Economics

Abstract: A prize is located at an unknown point on an island. In every period, each of n players searches part of the previously unsearched portion of the island. If a player finds the prize alone he wins it and the game ends. Players have a per-period discount factor and a search cost proportional to area searched. Superior symmetric Markov perfect equilibria are characterized. Equilibria for n ≥ 2 can exhibit two types of inefficiency: a tragedy of the commons (for small islands) and free riding (for large islands). For n ≥ 3, equilibrium properties are non-monotonic: players may be better off searching larger islands. The model is very general: applications include R&D races, team production, and extraction of exhaustible resources.

Keywords: R&D; search; uncertainty. (search for similar items in EconPapers)
Date: 2011-10, Revised 2014-05
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (4)

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