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Potential Competition in Preemption Games

  • Bobtcheff, Catherine
  • Mariotti, Thomas

We consider a preemption game with two potential competitors who come into play at some random secret times. The presence of a competitor is revealed to a player only when the former moves, which terminates the game. We show that all perfect Bayesian equilibria give rise to the same distribution of players' moving times. Moreover, there exists a unique perfect Bayesian equilibrium in which each player's behavior from any time on is independent of the date at which she came into play. We find that competitive pressure is nonmonotonic over time, and that private information tends to alleviate rent dissipation. Our results have a natural interpretation in terms of eroding reputations.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 10-140.

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Date of creation: Jan 2010
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Handle: RePEc:tse:wpaper:22000
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  1. Hugo A. Hopenhayn & Francesco Squintani, 2011. "Preemption Games with Private Information," Review of Economic Studies, Oxford University Press, vol. 78(2), pages 667-692.
  2. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
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  4. Hoppe, Heidrun C. & Lehmann-Grube, Ulrich, 2005. "Innovation timing games: a general framework with applications," Journal of Economic Theory, Elsevier, vol. 121(1), pages 30-50, March.
  5. Morgan, John, 2004. "Clock Games: Theory and Experiments," Santa Cruz Department of Economics, Working Paper Series qt81m0r0jj, Department of Economics, UC Santa Cruz.
  6. Michael H. Riordan, 1991. "Regulation and Preemptive Technology Adoption," Papers 0018, Boston University - Industry Studies Programme.
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  8. G. Giorgi & S. Komlósi, 1992. "Dini derivatives in optimization — Part I," Decisions in Economics and Finance, Springer, vol. 15(1), pages 3-30, March.
  9. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
  10. Hendricks, Kenneth, 1992. "Reputations in the adoption of a new technology," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 663-677, December.
  11. Eric Maskin & Jean Tirole, 1997. "Markov Perfect Equilibrium, I: Observable Actions," Harvard Institute of Economic Research Working Papers 1799, Harvard - Institute of Economic Research.
  12. Reinganum, Jennifer F., . "On the Diffusion of New Technology: A Game Theoretic Approach," Working Papers 312, California Institute of Technology, Division of the Humanities and Social Sciences.
  13. Dutta, Prajit K & Rustichini, Aldo, 1993. "A Theory of Stopping Time Games with Applications to Product Innovations and Asset Sales," Economic Theory, Springer, vol. 3(4), pages 743-63, October.
  14. Carolyn Pitchik, 1981. "Equilibria of a Two-Person Non-Zero Sum Noisy Game of Timing," Cowles Foundation Discussion Papers 579, Cowles Foundation for Research in Economics, Yale University.
  15. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 383-401, July.
  16. Dutta, Prajit K & Lach, Saul & Rustichini, Aldo, 1995. "Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 563-89, Winter.
  17. G. Giorgi & S. Komlósi, 1992. "Dini derivatives in optimization — Part II," Decisions in Economics and Finance, Springer, vol. 15(2), pages 3-24, September.
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