The Generalized War of Attrition

25 Pages Posted: 21 Jun 2000 Last revised: 20 Jul 2022

See all articles by Jeremy Bulow

Jeremy Bulow

Stanford University; National Bureau of Economic Research (NBER)

Paul Klemperer

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

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Date Written: January 1997

Abstract

We generalize the War of Attrition model to allow for N + K firms competing for N prizes. Two special cases are of particular interest. First, if firms continue to pay their full costs after dropping out (as in a standard-setting context), each firm's exit time is independent both of K and of the actions of other players. Second, in the limit in which firms pay no costs after dropping out (as in a natural-oligopoly problem), the field is immediately reduced to N + 1 firms. Furthermore, we have perfect sorting, so it is always the K 1 lowest-value players who drop out in zero time, even though each player's value is private information to the player. We apply our model to politics, explaining the length of time it takes to collect a winning coalition to pass a bill.

Suggested Citation

Bulow, Jeremy I. and Klemperer, Paul, The Generalized War of Attrition (January 1997). NBER Working Paper No. w5872, Available at SSRN: https://ssrn.com/abstract=225656

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