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Racing Under Uncertainty: A Boundary Value Problem Approach

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Abstract

In this paper I formulate a continuous time and continuous space version of Harris and Vickers (1987) Racing Under Uncertainty with potentially asymmetric players. To prove the existence and uniqueness of the equilibria, I use a boundary value problem formulation which is novel to the dynamic competition literature. In some cases, I obtain closed-form solutions of the equilibria in which equilibrium strategies exhibit the discouragement effect similar to the one in the original paper.

Suggested Citation

  • Dan Cao, 2010. "Racing Under Uncertainty: A Boundary Value Problem Approach," Working Papers gueconwpa~10-10-07, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~10-10-07
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    References listed on IDEAS

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    1. Lones Smith & Giuseppe Moscarini, 2007. "Optimal Dynamic Contests," 2007 Meeting Papers 249, Society for Economic Dynamics.
    2. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-748, September.
    3. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 467-492.
    4. Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(1), pages 1-21.
    5. Christopher Harris & John Vickers, 1985. "Perfect Equilibrium in a Model of a Race," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(2), pages 193-209.
    6. Christopher Budd & Christopher Harris & John Vickers, 1993. "A Model of the Evolution of Duopoly: Does the Asymmetry between Firms Tend to Increase or Decrease?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 543-573.
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    Cited by:

    1. Dilmé, Francesc, 2019. "Dynamic quality signaling with hidden actions," Games and Economic Behavior, Elsevier, vol. 113(C), pages 116-136.
    2. Francesc Dilmé, 2012. "Dynamic Quality Signaling with Moral Hazard," PIER Working Paper Archive 12-012, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Francesc Dilmé, 2012. "Dynamic Quality Signaling with Hidden Actions, Second Version," PIER Working Paper Archive 13-063, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Oct 2013.

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