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All-pay war

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  • Hodler, Roland
  • Yektaş, Hadi

Abstract

We study a model of conflicts and wars in which the outcome is uncertain not because of luck on the battlefield as in standard models, but because countries lack information about their opponent. In this model expected resource levels and production and military technologies are common knowledge, but realized resource levels are private information. Each country decides how to allocate its resources to production and warfare. The country with the stronger military wins and receives aggregate production. In equilibrium both comparative and absolute advantages matter: a larger resource share is allocated to warfare by the country with a comparative advantage in warfare at relatively low realized resource levels, and by the country with an absolute disadvantage in warfare at relatively high realized resource levels. From an ex-ante perspective the country with a comparative advantage in warfare is more likely to win the war unless its military potential is much lower.

Suggested Citation

  • Hodler, Roland & Yektaş, Hadi, 2012. "All-pay war," Games and Economic Behavior, Elsevier, vol. 74(2), pages 526-540.
    • Handle: RePEc:eee:gamebe:v:74:y:2012:i:2:p:526-540
    DOI: 10.1016/j.geb.2011.08.010
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    Cited by:

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    More about this item

    Keywords

    Conflict; War; All-pay auction; Private information;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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