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Sequential Contest when the Precision of Observation is Endogenous

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  • Yohan Pelosse

    (Humanities and Social Sciences, Swansea University)

Abstract

This paper explores a sequential contest where the second-mover can, at some cost, invests in a more or less precise signal on the leader's action before making his own move. We show that this signaling structure a la Weibull et al. (2007) guarantees the existence of a mixed-strategy perfect Bayesian equilibrium that fully preserves the value of commitment. We also prove that the profits of the first-mover in this type of equilibrium are always higher than in the subgame perfect equilibriumof the standard sequential contest.

Suggested Citation

  • Yohan Pelosse, 2024. "Sequential Contest when the Precision of Observation is Endogenous," Working Papers 2024-02, Swansea University, School of Management.
    • Handle: RePEc:swn:wpaper:2024-02
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    File URL: https://rahwebdav.swan.ac.uk/repec/pdf/WP2024-02.pdf
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    References listed on IDEAS

    as
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    7. Jörgen Weibull & Lars-Göran Mattsson & Mark Voorneveld, 2007. "Better May be Worse: Some Monotonicity Results and Paradoxes in Discrete Choice Under Uncertainty," Theory and Decision, Springer, vol. 63(2), pages 121-151, September.
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