Choosing Fair Lotteries to Defeat the Competition

36 Pages Posted: 5 Sep 2013

See all articles by Liad Wagman

Liad Wagman

Illinois Institute of Technology - Stuart School of Business, IIT

Vincent Conitzer

Duke University

Date Written: September 4, 2013

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.

Keywords: Strategic gambling, Nash equilibrium, fair lotteries

JEL Classification: C70, C72, D81, L20

Suggested Citation

Wagman, Liad and Conitzer, Vincent, Choosing Fair Lotteries to Defeat the Competition (September 4, 2013). Available at SSRN: https://ssrn.com/abstract=2320643 or http://dx.doi.org/10.2139/ssrn.2320643

Liad Wagman (Contact Author)

Illinois Institute of Technology - Stuart School of Business, IIT ( email )

565 W Adams St Suite 412
Chicago, IL 60661
United States
7739809883 (Phone)

HOME PAGE: http://https://lwagman.org

Vincent Conitzer

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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