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Contests with Ambiguity

Author

Listed:
  • David Kelsey

    (Department of Economics, University of Exeter)

  • Tigran Melkonyan

    (University of Warwick)

Abstract

The paper examines the effect of ambiguity on contests where multiple parties expend resources to win a prize. We develop a model where contenders perceive ambiguity about their opponents’ strategies and determine how perceptions of ambiguity and attitudes to ambiguity affect equilibrium choice. The paper also investigates how equilibrium under ambiguity is related to behavior where contenders have expected utility preferences. Our model can explain experimental results such as overbidding and overspreading relative to Nash predictions.

Suggested Citation

  • David Kelsey & Tigran Melkonyan, 2014. "Contests with Ambiguity," Discussion Papers 1411, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:1411
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    File URL: https://exetereconomics.github.io/RePEc/dpapers/DP1411.pdf
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    References listed on IDEAS

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    Cited by:

    1. Enrico Lupi, 2024. "The impact of a winner takes all tournament on managers’ strategies and asset mispricing," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 47(1), pages 121-136, June.
    2. Paan Jindapon & Zhe Yang, 2020. "Free riders and the optimal prize in public‐good funding lotteries," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1289-1312, September.
    3. Christoph March & Marco Sahm, 2021. "Parochial altruism and the absence of the group size paradox in inter-group conflicts," Economics Bulletin, AccessEcon, vol. 41(2), pages 361-373.
    4. Evren, Özgür, 2019. "Recursive non-expected utility: Connecting ambiguity attitudes to risk preferences and the level of ambiguity," Games and Economic Behavior, Elsevier, vol. 114(C), pages 285-307.

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    More about this item

    Keywords

    Ambiguity; Contests; Choquet expected utility; neo-additive preferences.;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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