Signaling in dynamic contests with heterogeneous rivals

Catepillán J.; Figueroa N.; Lemus J. · Journal of Mathematical Economics (2025) · DOI: 10.1016/j.jmateco.2024.103080

Resumen

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.

Instituciones: Universidad de Piura