Sequential Contest when the Precision of Observation is Endogenous

Yohan Pelosse ()
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Yohan Pelosse: Humanities and Social Sciences, Swansea University

No 2024-02, Working Papers from Swansea University, School of Management

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.

Pages: 10 pages
Date: 2024-02-21
New Economics Papers: this item is included in nep-gth and nep-mic
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