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The Generalized War of Attrition

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  • Paul Klemperer
  • Jeremy Bulow

Abstract

The authors model a war of attrition with N+K firms competing for N prizes. In a 'natural oligopoly' context, the K - 1 lowest-value firms drop out instantaneously, even though each firm's value is private information to itself. In a 'standard setting' context, in which every competitor suffers losses until a standard is chosen, even after giving up on its own preferred alternative, each firm's exit time is independent both of K and of other players' actions. The authors' results explain how long it takes to form a winning coalition in politics. Solving the model is facilitated by the revenue equivalence theorem.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.89.1.175
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 1 (March)
Pages: 175-189

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:1:p:175-189

Note: DOI: 10.1257/aer.89.1.175
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References

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  1. Jeremy Bulow & Paul Klemperer, 1997. "The Generalized War of Attrition," NBER Working Papers 5872, National Bureau of Economic Research, Inc.
  2. Baye, M. & Kovenock, D. & Vries, C. de, 1990. "The All-Pay Auction with Complete Information," Discussion Paper 1990-51, Tilburg University, Center for Economic Research.
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  10. Bulow, Jeremy & Klemperer, Paul, 1994. "Rational Frenzies and Crashes," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 1-23, February.
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  20. Klepper, Steven & Simons, Kenneth L, 1997. "Technological Extinctions of Industrial Firms: An Inquiry into Their Nature and Causes," Industrial and Corporate Change, Oxford University Press, vol. 6(2), pages 379-460, March.
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