Negative and Positive Effects of Competition in a Preemption Game Volume 4 Jena Economic Research Papers 2010-12-02 2010 2007 2010-085 Competition Preemption game Strategic real option Agents compete to acquire a limited economic opportunity of uncertain pro…tability. Each agent decides how much he acquires public signals before making investment under fear of preemption. I show that equilibria have various levels of e¢ ciency under mild competition. The e¤ect of competition on the equilibrium strategy is di¤erent depending on which class of equilibrium we focus on. However, when competitive pressure is su¢ ciently high, there exists a unique equilibrium. Finally, I show that the e¤ect of competition on e¢ ciency is di¤erent between the common value and the private value setting. Strong competition leads to the least e¢ cient equilibrium for the common value setting but e¢ ciency can be improved by competition in the private value setting. jportal_jpjournal_00000016 2010-12-02T07:55:41.165Z 2010-12-17T11:54:30.707Z