Contests with Ambiguity

Paper number: 14/11

Paper date: June 20, 2014

Year: 2014

Paper Category: Discussion Paper

Authors

David Kelsey and Tigran Melkonyan

Abstract

The paper examines the effect of ambiguity on contests where multiple parties expend resources  to win a prize. We develop a model where contenders perceive ambiguity about  their opponents’ strategies and determine how perceptions of ambiguity and attitudes to  ambiguity affect equilibrium choice. The paper also investigates how equilibrium under ambiguity is related to behavior where contenders have expected utility preferences. Our model  can explain experimental results such as overbidding and overspreading relative to Nash predictions.

Contests with Ambiguity Contests with Ambiguity