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Free keywords:
Contest, budget limits, incomplete information, alliances, information sharing
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.
