Opportunity Hunters: A Model of Competitive Sequential Inspections

Abstract

There are many economic situations in which players compete to identify an uncertain event, or an "opportunity." Once an opportunity appears, seizing it quickly is critical. For example, two firms may consider the introduction of a new technology into a market, which may either be ripe for the technology or not. The first firm to identify that the market is ripe and act benefits greatly. However, acting if the market is not ripe generates large losses, and checking market conditions is costly. Other natural contexts in which competition for opportunities occurs include innovation, patenting, launching new products, selling assets, head hunting, and dating. What is common to all these examples is that the right moment to act depends on identifying an unobservable event, while taking the other player's strategy into account.