Private Information Acquisition and Preemption : A Strategic Wald Problem

This paper introduces strategic preemption motives into a dynamic information acquisition model. Two players can acquire costly information about an unknown statebefore taking an irreversible safe or risky action. The risky action gives the players a higher payoff than the safe action only in the high state and there is a first-mover advantage associated with it. The competition is private as the action taken and the information acquisition are not observable. Examples include market entry, R&D races and priority races in research. I show that, depending on prior beliefs, information acquisition can be a strategic complement or a strategic substitute. When the players have sufficiently uncertain prior beliefs, multiple equilibria, where players use the random stopping strategy, can be sustained