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Choosing fair lotteries to defeat the competition

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Abstract

We study the following game: each agent i chooses a lottery over nonnegative numbers whose expectation is equal to his budget b i . The agent with the highest realized outcome wins (and agents only care about winning). This game is motivated by various real-world settings where agents each choose a gamble and the primary goal is to come out ahead. Such settings include patent races, stock market competitions, and R&D tournaments. We show that there is a unique symmetric equilibrium when budgets are equal. We proceed to study and solve extensions, including settings where agents choose their budgets (at a cost) and where budgets are private information.

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Authors and Affiliations

  1. Stuart School of Business, Illinois Institute of Technology, 565 W Adams St, Suite 452, Chicago, IL, 60661, USA

    Liad Wagman

  2. Departments of Computer Science and Economics, Levine Science Research Center, Duke University, Box 90129, Durham, NC, 27708, USA

    Vincent Conitzer

Authors
  1. Liad Wagman
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  2. Vincent Conitzer
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Corresponding author

Correspondence to Liad Wagman.

Additional information

Early versions of this work were presented at the Victor Rothschild Memorial Symposium on Economic Aspects of Communication and Information (2007), the Conference on Autonomous Agents and Multi Agent Systems (2008), the World Congress of the Game Theory Society (2008), and the Duke Microeconomics lunch seminar.

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Wagman, L., Conitzer, V. Choosing fair lotteries to defeat the competition. Int J Game Theory 41, 91–129 (2012). https://doi.org/10.1007/s00182-011-0275-9

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  • DOI: https://doi.org/10.1007/s00182-011-0275-9

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