The absence of attrition in a war of attrition under complete information

George Georgiadis*, Youngsoo Kim, H. Dharma Kwon

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish (US)
Pages (from-to)171-185
Number of pages15
JournalGames and Economic Behavior
Volume131
DOIs
StatePublished - Jan 2022

Keywords

  • Continuous time
  • Mixed strategies
  • War of attrition

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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