Sent Seeking With Private Values

Abstract

We study a rent-seeking contest in which the players'valuations of the prize are private information. We determinea Bayesian equilibrium and give conditions under which theequilibrium exists. Although players are ex ante symmetric,increased possibilities for ex post lopsidedness lead toless aggressive bidding. (Lopsidedness increases as players'values become less positively correlated or as the variationin possible values increases.) We also compare theprivate-information contest to a related public-informationcontest in which the realizations of values are commonknowledge. The contests are equally efficient and players areindifferent between the two, but risk-averse sellers of theprize are not.