Continuous Time Contests with Private Information

Christian Seel and Philipp Stracky

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: This paper introduces a class of contest models in which each player decides when to stop a privately observed Brownian motion with drift and incurs costs depending on his stopping time. The player who stops his process at the highest value wins a prize. We prove existence and uniqueness of a Nash equilibrium outcome and derive the equilibrium distribution in closed form. As the variance tends to zero, the equilibrium outcome converges to the symmetric equilibrium of an all-pay auction. For two players and constant costs, each player's equilibrium pro fit decreases if the drift increases, the variance decreases, or the costs increase.

JEL-codes: C72 C73 D44 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100527

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