The Generalized War of Attrition

Posted: 14 Apr 1999

See all articles by Paul Klemperer

Paul Klemperer

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

Jeremy Bulow

Stanford University; National Bureau of Economic Research (NBER)

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Abstract

We model a War of Attrition with N+K firms competing for N prizes. If firms must pay their full costs until the whole game ends, even after dropping out themselves (as in a standard-setting context), each firm's exit time is independent both of K and of other players' actions. If, instead, firms pay no costs after dropping out (as in a natural oligopoly), the field is immediately reduced to N+1 firms. Furthermore, in this limit it is always the K-1 lowest-value firms who drop out in zero time, even though each firm's value is private information to itself.

JEL Classification: D43, D44, L13, O30

Suggested Citation

Klemperer, Paul and Bulow, Jeremy I., The Generalized War of Attrition. American Economic Review. Available at SSRN: https://ssrn.com/abstract=154828

Paul Klemperer (Contact Author)

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Jeremy I. Bulow

Stanford University ( email )

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