Signaling in dynamic contests with heterogeneous rivals

Jorge Catepillán, Nicolás Figueroa, Jorge Lemus

Research output: Contribution to journalArticlepeer-review

Abstract

We study signaling in dynamic contests where a privately informed challenger faces multiple rivals. When the challenger can choose between simultaneous and sequential contests, the optimal choice hinges on the degree of player heterogeneity. This is because the strength of future opponents affects the incentive to signal, whereas the strength of current opponents affects the extent and cost of signaling. We show that against homogeneous rivals, the challenger may prefer to reveal information through sequential contests. However, against heterogeneous opponents, the challenger prefers simultaneous contests to avoid information revelation. Additionally, in sequential contests with heterogeneous rivals, we characterize the equilibrium choice of rivals’ order (e.g., weak first and strong second) and show that only pooling and partial-pooling equilibria emerge.

Original languageEnglish (US)
Article number103080
JournalJournal of Mathematical Economics
Volume116
DOIs
StatePublished - Feb 2025

Keywords

  • Contests
  • Dynamic games
  • Learning
  • Signaling

ASJC Scopus subject areas

  • Economics and Econometrics
  • Applied Mathematics

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