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The Generalized War of Attrition

Author

Listed:
  • 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.

Suggested Citation

  • Paul Klemperer & Jeremy Bulow, 1999. "The Generalized War of Attrition," American Economic Review, American Economic Association, vol. 89(1), pages 175-189, March.
  • 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 listed on IDEAS

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    1. Casella, Alessandra & Eichengreen, Barry, 1996. "Can Foreign Aid Accelerate Stabilisation?," Economic Journal, Royal Economic Society, vol. 106(436), pages 605-619, May.
    2. Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June.
    3. Bulow, Jeremy & Klemperer, Paul, 1994. "Rational Frenzies and Crashes," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 1-23, February.
    4. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-392, June.
    5. 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.
    6. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, March.
    7. Joseph Farrell & Garth Saloner, 1988. "Coordination through Committees and Markets," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 235-252, Summer.
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    10. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-286, July.
    12. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 291-305.
    13. Paul Klemperer & Jeremy Bulow, 1999. "The Generalized War of Attrition," American Economic Review, American Economic Association, vol. 89(1), pages 175-189, March.
    14. Drew Fudenberg & David M. Kreps, 1987. "Reputation in the Simultaneous Play of Multiple Opponents," Review of Economic Studies, Oxford University Press, vol. 54(4), pages 541-568.
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    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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