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    Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Economic Dynamics and Control. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Dynamics and Control, 90 2018 DOI: 10.1016/j.jedc.2018.03.004

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Shipwrecks and treasure hunters

Research output: Contribution to journalJournal article

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<mark>Journal publication date</mark>05/2018
<mark>Journal</mark>Journal of Economic Dynamics and Control
Volume90
Number of pages25
Pages (from-to)259-283
Publication statusPublished
Early online date22/03/18
Original languageEnglish

Abstract

We examine dynamic search as a game in which two rivals explore (an island) for a hidden prize of known value. In every period until its discovery, the players decide how much of the unsearched area to comb. If a player finds the prize alone he wins it and the game ends. Players have a per-period discount factor and costs proportional to the area they search. First, as a benchmark for efficiency, we solve the one-player search problem. Second, in the two-player setting we show that typically there is inefficient over-search – a result akin to the tragedy of the commons. However, for players with intermediate levels of patience, there is the possibility of inefficient under-search as players incorporate the expected future payoffs in their current search decisions. Finally, with patient players, several counterintuitive results can arise: for example, players might be better off searching a larger island or looking for a less valuable prize.

Bibliographic note

This is the author’s version of a work that was accepted for publication in Journal of Economic Dynamics and Control. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Dynamics and Control, 90 2018 DOI: 10.1016/j.jedc.2018.03.004