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Alliance Formation in Contests with Incomplete Information

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  • Metzger, Lars P.

Abstract

This paper studies a contest in which players with unobservable types may form an alliance in a pre-stage of the game to join their forces and compete for a prize. We characterize the pure strategy equilibria of this game of incomplete information. We show that if the formation of an alliance is voluntary, players do not reveal private information in the process of alliance formation in any equilibrium. In this case there exists a pooling equilibrium without alliances with a unique effort choice in the contest and there exist equilibria in which all types prefer to form an alliance. If the formation of an alliance can be enforced by one player with positive probability there exists an equilibrium in which only the low types prefer to form an alliance.

Suggested Citation

  • Metzger, Lars P., 2015. "Alliance Formation in Contests with Incomplete Information," Ruhr Economic Papers 544, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:544
    DOI: 10.4419/86788622
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    References listed on IDEAS

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    Cited by:

    1. Luisa Herbst, 2016. "Who Pays to Win Again? The Joy of Winning in Contest Experiments," Working Papers tax-mpg-rps-2016-06, Max Planck Institute for Tax Law and Public Finance.

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    More about this item

    Keywords

    alliance formation; contest; incomplete information; free-riding; signalling;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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