Social Welfare in Search Games with Asymmetric Information

TL;DR

This paper analyzes search games with asymmetric information, establishing conditions for equilibria that maximize social welfare and exploring implications for innovation contests and R&D races.

Contribution

It provides new conditions for the existence of first-best equilibria and characterizes the maximum social payoff in asymmetric information search games.

Findings

Conditions for equilibrium existence with optimal social payoff

Characterization of the first-best social payoff

Implications for innovation contests and R&D races

Abstract

We consider games in which players search for a hidden prize, and they have asymmetric information about the prize location. We study the social payoff in equilibria of these games. We present sufficient conditions for the existence of an equilibrium that yields the first-best payoff (i.e., the highest social payoff under any strategy profile), and we characterize the first-best payoff. The results have interesting implications for innovation contests and R&D races.