Know Thy Enemy: Information Acquisition in Contests

Abstract

This paper studies the incentives for and consequences of acquiring information about rivals in winner-take-all contests. Each player can acquire private information about the rival’s value from an arbitrarily large set of signals before the competition. The player who acquires a more accurate signal than what the rival does wins more often by the same expected effort as the rival. Being the target of the rival’s information acquisition does not hurt and learning partial information about each other benefits both players. Nevertheless, they may not acquire any information if the accuracies of their signals are not publicly observable.

Keywords: Information acquisition, Contests, All-pay auctions, Rotation order, Competitive intelligence