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Information acquisition in conflicts

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  • Florian Morath

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  • Johannes Münster

    ()

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    Abstract

    This paper considers incentives for information acquisition ahead of conflicts. First, we characterize the (unique) equilibrium of the all-pay auction between two players with one-sided asymmetric information where one player has private information about his valuation. Then, we use our results to study information acquisition prior to an all-pay auction. If the decision to acquire information is observable, but not the information received, one-sided asymmetric information can occur endogenously in equilibrium. Moreover, the cut-off values of the cost of information that determine equilibrium information acquisition are higher than those in the first best. Thus, information acquisition is excessive. In contrast, with open or covert information acquisition, the equilibrium cut-off values are as in the first best. Copyright Springer-Verlag 2013

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    File URL: http://hdl.handle.net/10.1007/s00199-012-0710-6
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    Bibliographic Info

    Article provided by Springer in its journal Economic Theory.

    Volume (Year): 54 (2013)
    Issue (Month): 1 (September)
    Pages: 99-129

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    Handle: RePEc:spr:joecth:v:54:y:2013:i:1:p:99-129

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    Related research

    Keywords: All-pay auctions; Conflicts; Contests; Information acquisition; Asymmetric information; D72; D74; D82; D83;

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    References

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    1. Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics.
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    11. Groh, Christian & Moldovanu, Benny & Sela, Aner & Sunde, Uwe, 2012. "Optimal seedings in elimination tournaments," Munich Reprints in Economics 20441, University of Munich, Department of Economics.
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    16. Wärneryd, Karl, 2001. "Information in conflicts," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-11, Social Science Research Center Berlin (WZB).
    17. Alcalde, José & Dahm, Matthias, 2010. "Rent seeking and rent dissipation: A neutrality result," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 1-7, February.
    18. Barut, Yasar & Kovenock, Dan, 1998. "The symmetric multiple prize all-pay auction with complete information," European Journal of Political Economy, Elsevier, vol. 14(4), pages 627-644, November.
    19. Mattias Polborn, 2006. "Investment under Uncertainty in Dynamic Conflicts," Review of Economic Studies, Oxford University Press, vol. 73(2), pages 505-529.
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