Negative and Positive Effects of Competition in a Preemption Game
AbstractAgents compete to acquire a limited economic opportunity of uncertain profitability. Each agent decides how much he acquires public signals before making investment under fear of preemption. I show that equilibria have various levels of efficiency under mild competition. The eect of competition on the equilibrium strategy is dierent depending on which class of equilibrium we focus on. However, when competitive pressure is sufficiently high, there exists a unique equilibrium. Finally, I show that the eect of competition on efficiency is dierent between the common value and the private value setting. Strong competition leads to the least efficient equilibrium for the common value setting but efficiency can be improved by competition in the private value setting.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-085.
Date of creation: 02 Dec 2010
Date of revision:
Competition; Preemption game; Strategic real option;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-BEC-2010-12-11 (Business Economics)
- NEP-COM-2010-12-11 (Industrial Competition)
- NEP-GTH-2010-12-11 (Game Theory)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Markus Pasche).
If references are entirely missing, you can add them using this form.