All-Pay War

26 Pages Posted: 27 Jul 2013

See all articles by Roland Hodler

Roland Hodler

University of Melbourne

Hadi Yektas

Antalya International University

Date Written: April 21, 2010

Abstract

We study a model of conflicts and wars in which the outcome is uncertain not because of luck on the battlefield as in standard models, but because countries lack information about their opponent. In this model expected resource levels and production and military technologies are common knowledge, but realized resource levels are private information. Each country decides how to allocate its resources to production and warfare. The country with the stronger military wins and receives aggregate production. In equilibrium both comparative and absolute advantages matter: a larger resource share is allocated to warfare by the country with a comparative advantage in warfare at relatively low realized resource levels, and by the country with an absolute disadvantage in warfare at relatively high realized resource levels. From an ex-ante perspective the country with a comparative advantage in warfare is more likely to win the war unless its military potential is much lower.

Keywords: Conflict, War, All-pay auction, Private information

JEL Classification: D44, D74, H56

Suggested Citation

Hodler, Roland and Yektas, Hadi, All-Pay War (April 21, 2010). Available at SSRN: https://ssrn.com/abstract=1594133 or http://dx.doi.org/10.2139/ssrn.1594133

Roland Hodler

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

Hadi Yektas (Contact Author)

Antalya International University ( email )

Üniversite Cad. No:2
Döşemealtı, 07190
Turkey

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