Gambling in contests with random initial law

DOI10.1214/14-AAP1088MaRDI QIDQ259573zbMATH OpenOpenAlexFDO

Authors Han Feng, David Hobson

Publication date 11 March 2016

Published in The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1405.7801, https://projecteuclid.org/euclid.aoap/1452003237

zbMATH Keywords

Brownian motionstopping ruleNash equilibriumgambling contestrandom initial lawSeel-Strack problemSkorokhod embedding

Mathematics Subject Classification ID

Brownian motion (60J65) 2-person games (91A05) Stopping times; optimal stopping problems; gambling theory (60G40) Probabilistic games; gambling (91A60)

Abstract: This paper studies a variant of the contest model introduced in Seel and Strack [J. Econom. Theory 148 (2013) 2033-2048]. In the Seel-Strack contest, each agent or contestant privately observes a Brownian motion, absorbed at zero, and chooses when to stop it. The winner of the contest is the agent who stops at the highest value. The model assumes that all the processes start from a common value $x_0>0$ and the symmetric Nash equilibrium is for each agent to utilise a stopping rule which yields a randomised value for the stopped process. In the two-player contest, this randomised value has a uniform distribution on $[0,2x_0]$. In this paper, we consider a variant of the problem whereby the starting values of the Brownian motions are independent, nonnegative random variables that have a common law $mu$. We consider a two-player contest and prove the existence and uniqueness of a symmetric Nash equilibrium for the problem. The solution is that each agent should aim for the target law $u$, where $u$ is greater than or equal to $mu$ in convex order; $u$ has an atom at zero of the same size as any atom of $mu$ at zero, and otherwise is atom free; on $(0,infty)$ $u$ has a decreasing density; and the density of $u$ only decreases at points where the convex order constraint is binding.

Recommendations

• Gambling in contests modelled with diffusions
• Gambling in contests
• Continuous time contests with private information
• Gambling in contests with regret
• Gambling in contests with heterogeneous loss constraints

Cites work

• scientific article; zbMATH DE number 3516405 (Why is no real title available?)
• scientific article; zbMATH DE number 3236476 (Why is no real title available?)
• Gambling in contests
• Gambling in contests modelled with diffusions
• The Skorokhod embedding problem and its offspring
• The Skorokhod embedding problem and model-independent bounds for option prices
• The War of Attrition in Continuous Time with Complete Information
• The all-pay auction with complete information
• The stopping distributions of a Markov process
• The value of information in asymmetric all-pay auctions
• -selection principles for sequences of functions

Cited in

(13)

• Reward design in risk-taking contests
• Gambling in contests
• On Skorokhod embeddings and Poisson equations
• Betting and Equilibrium
• Submission costs in risk-taking contests
• scientific article; zbMATH DE number 5832244 (Why is no real title available?)
• Approximation, Randomization, and Combinatorial Optimization.. Algorithms and Techniques
• Gambling in contests modelled with diffusions
• Gambling in contests with heterogeneous loss constraints
• Gambling in contests with regret
• Continuous time contests with private information
• Fluctuations of martingales and winning probabilities of game contestants
• A Mean Field Competition

This page was built for publication: Gambling in contests with random initial law

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q259573)