Private Information Acquisition and Preemption: A Strategic Wald Problem

44 Pages Posted: 15 Jun 2023

See all articles by Guo Bai

Guo Bai

University College London

Abstract

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.

Keywords: Dynamic Information Acquisition, Preemption, Poisson Signals, Wald Problem

Suggested Citation

Bai, Guo, Private Information Acquisition and Preemption: A Strategic Wald Problem. Available at SSRN: https://ssrn.com/abstract=4479936 or http://dx.doi.org/10.2139/ssrn.4479936

Guo Bai (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

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