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Resource inequality in the war of attrition

Author

Listed:
  • Bingchao Huangfu

    (Nanjing Audit University)

  • Gagan Ghosh

    (California State University Fullerton)

  • Heng Liu

    (University of Michigan)

Abstract

This paper studies a war of attrition in which players have private and asymmetric resource constraints. We show that resource inequality, measured by whether and by how much a player can fight longer than her opponent, is a key measure of strength in a war of attrition. In the unique equilibrium surviving a refinement, players with more resources always fight and players with fewer resources fight to develop a reputation of “deep pocket” until they deplete their resources. As a result, private resource constraints and resource inequality often exacerbate the outcome inequality. Furthermore, changes in resource inequality have a non-monotonic effect on the length of the war, which is consistent with empirical findings. Finally, we extend the results to the case with a continuum of resource levels to further examine the impact of resource inequality.

Suggested Citation

  • Bingchao Huangfu & Gagan Ghosh & Heng Liu, 2023. "Resource inequality in the war of attrition," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(1), pages 33-61, March.
    • Handle: RePEc:spr:jogath:v:52:y:2023:i:1:d:10.1007_s00182-022-00809-0
    DOI: 10.1007/s00182-022-00809-0
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    References listed on IDEAS

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    More about this item

    Keywords

    Wars of attrition; Private resource constraints.;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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