Tuesday, December 27, 2016 | 2:00pm-3:30pm | Room 329, HSBC Business School Building

Abstract

Two players compete for a prize and their valuations are private information. Before
the contest, each player can covertly acquire a costly, noisy and private signal regarding the
opponent’s valuation. In equilibrium, each player’s effort is non-decreasing in the posterior
probability that the opponent has the same valuation. Accounting for the cost of spying,
players are strictly better off spying when the spying technology is partially but not perfectly
informative. Suppose instead that each player can, at no cost, ex ante commit to disclose
a signal about her valuation to the opponent, but cannot observe realizations of the signal.
Then every equilibrium involves non-disclosure by at least one player, even though some
disclosure by each player would benefit both.