Information Alliances in Contests with Budget Limits

WZB Markets and Politics Working Paper No. SP II 2010-21

25 Pages Posted: 19 Aug 2011

See all articles by Kai A. Konrad

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Date Written: December 1, 2010

Abstract

We study the role of information exchange through alliances in a framework with contestants who have binding budget limits and know their own budget limit but are incompletely informed about other contestants’ budget limits. First, we solve for the Bayesian Nash equilibrium. Then we consider the role of information exchange through alliances. Contestants learn the budget limits of all players who are within the same alliance, and then decide independently about their own contest efforts. This type of alliance formation is beneficial for alliance members and neutral for players who do not belong to the alliance. Also, a merger between alliances is beneficial for their members. Further, we consider merger between alliances and discuss the set of stable combinations of alliances.

Keywords: contest, budget limits, incomplete information, alliances, information

JEL Classification: D72, D74

Suggested Citation

Konrad, Kai A., Information Alliances in Contests with Budget Limits (December 1, 2010). WZB Markets and Politics Working Paper No. SP II 2010-21. Available at SSRN: https://ssrn.com/abstract=1912374 or http://dx.doi.org/10.2139/ssrn.1912374

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

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Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Germany

IZA Institute of Labor Economics

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Germany

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