Negative and Positive Effects of Competition in aPreemption Game
Agents compete to acquire a limited economic opportunity of uncertain pro tability.Each agent decides how much he acquires public signals before making investmentunder fear of preemption. I show that equilibria have various levels of e¢ ciency undermild competition. The e¤ect of competition on the equilibrium strategy is di¤erentdepending on which class of equilibrium we focus on. However, when competitivepressure is su¢ ciently high, there exists a unique equilibrium. Finally, I show thatthe e¤ect of competition on e¢ ciency is di¤erent between the common value and theprivate value setting. Strong competition leads to the least e¢ cient equilibrium forthe common value setting but e¢ ciency can be improved by competition in the privatevalue setting.
C73 - Stochastic and Dynamic Games ; C83 - Survey Methods; Sampling Methods ; Subject matter and research method of business administration ; Individual Working Papers, Preprints ; No country specification