Ella Segev

The optimal prize structure of symmetric Tullock contests

We show that the optimal prize structure of symmetric n-player Tullock tournaments assigns the entire prize pool to the winner, provided that a symmetric pure strategy equilibrium exists. If such an equilibrium fails to exist under the winner-take-all structure, we construct the optimal prize structure which improves existence conditions by dampening efforts. If no such optimal equilibrium exists, no symmetric pure strategy equilibrium induces positive efforts.

Sequential all-pay auctions with head starts

We study a sequential all-pay auction with two contestants who are privately informed about a parameter (ability) that affects their cost of effort. We characterize the unique perfect Bayesian equilibrium of this sequential all-pay auction and analyze if giving a head start, i.e., an exogenously determined mechanism that increases the winning probability of the first mover for any level of effort she exerts, improves the contestants’ performance. In particular, we analyze the difference between a multiplicative head start and an additive head start with respect to the effect on the contestants’ performance.

Escalation and delay in protracted international conflicts

Why do escalations in protracted international conflicts sometimes hasten the pace of negotiations ? And why is it sometimes the case that the resulting terms of agreement were deemed unacceptable to one or both sides before the escalation ? We analyze these issues in a game-theoretic setting with asymmetric information, in which the delay a party exercises before it makes an acceptable offer is served to signal credibly its true stand, of which the other side is initially uncertain.Escalation makes both sides more eager to settle than before, as an agreement would end the increased level of hostilities. We analyze how this effect may loosen the incentives to exercise long delays in the course of bargaining, and hence shorten the time to agreement. However, it turns out that the larger is the overall increase in violence implied by escalation, the higher are also the chances that its initiator will eventually regret its own decision to escalate. These insights emerge both with one-sided and two-sided asymmetric information.

Efficiency levels in sequential auctions with dynamic arrivals

In an environment with dynamic arrivals of players who wish to purchase only one of multiple identical objects for which they have a private value, we analyze a sequential auction mechanism with an activity rule. If the players play undominated strategies then we are able to bound the efficiency loss compared to an optimal mechanism that maximizes the total welfare. We have no assumptions on the underlying distribution from which the players’ arrival times and valuations for the object are drawn. Moreover we have no assumption of a common prior on this distribution.

Social Learning and the Design of New Experience Goods

Consumers often consult the reviews of their peers before deciding whether to purchase a new experience good; however, their initial quality expectations are typically set by the product’s observab...

Price Discrimination Based on Buyers’ Purchase History

We consider a repeated sales situation in which a seller sells one unit of a good each period to the same buyer. Having incomplete information about the buyer’s valuation, the seller responds to the buyer’s behavior, meaning, whether she bought previous units and at what price. We characterize the equilibrium of the no-commitment game for a uniform distribution and show that the seller discriminates between buyers based on their purchase history. Moreover, we show that the buyer’s ex-ante expected payoff is higher in the no-commitment game than in a game in which the seller can commit in advance to the prices he will charge (the commitment game). We also demonstrate that the buyer’s ex-post payoff is higher for each type of buyer in the no-commitment game. Social welfare is also higher in the no-commitment game. As the number of periods (units) increases, the opening prices decline, but fewer types of buyers accept the opening price.

Sequential Bidding in Asymmetric First Price Auctions

We study asymmetric first price auctions in which bidders place their bids sequentially, one after the other and only once. We show that, when bidders’ values are drawn from uniform distributions and are asymmetric, i.e., there is a strong bidder and a weak bidder (the strong bidder’s distribution first order stochastically dominates that of the weak bidder’s), the expected revenue in the sequential bidding first price auction (when the strong bidder bids first) may be higher than in the simultaneous bidding first price auction as well as the simultaneous bidding second price auction. The expected payoff of the weak bidder is also higher in the sequential first price auction. Therefore a seller interested in increasing revenue facing asymmetric bidders may find it beneficial to order them and let them bid sequentially instead of simultaneously.