The Absence of Attrition in the War of Attrition under Complete Information

32 Pages Posted: 8 Apr 2019 Last revised: 4 May 2020

See all articles by George Georgiadis

George Georgiadis

Northwestern University - Kellogg School of Management

Youngsoo Kim

University of Alabama - Culverhouse College of Business

H. Dharma Kwon

University of Illinois at Urbana-Champaign - Gies College of Business

Date Written: March 6, 2020

Abstract

We consider a two-player game of war of attrition under complete information. It is well- known that this class of games admits equilibria in pure, as well as mixed strategies, and much of the literature has focused on the latter. We show that if the players’ payoffs whilst in “war” vary stochastically and their exit payoffs are heterogeneous, then the game admits Markov Perfect equilibria in pure strategies only. This is true irrespective of the degree of randomness and heterogeneity, thus highlighting the fragility of mixed-strategy equilibria to a natural perturbation of the canonical model. In contrast, when the players’ flow payoffs are deterministic or their exit payoffs are homogeneous, the game admits equilibria in pure and mixed strategies.

Keywords: war of attrition, stochastic dynamic game, equilibrium selection

JEL Classification: C73, C72

Suggested Citation

Georgiadis, George and Kim, Youngsoo and Kwon, H. Dharma, The Absence of Attrition in the War of Attrition under Complete Information (March 6, 2020). Available at SSRN: https://ssrn.com/abstract=3353450 or http://dx.doi.org/10.2139/ssrn.3353450

George Georgiadis

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Youngsoo Kim

University of Alabama - Culverhouse College of Business ( email )

361 Stadium Dr
Tuscaloosa, AL 35487-0223
United States

H. Dharma Kwon (Contact Author)

University of Illinois at Urbana-Champaign - Gies College of Business ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
42
Abstract Views
454
PlumX Metrics