Communication and Standoff

This paper examines the potential for pre-play communication to shorten the duration of two-player incomplete-information wars of attrition. If players’ types constitute costlessly verifiable information, then all types of players disclose their types, resulting in the war of attrition having duration zero. However, if type constitutes unverifiable information, the results are less sanguine. Pre-play cheap-talk communication has no effect on the play of the subsequent war of attrition. Mediated cheap-talk communication is no better: No institution that relies on players’ cheap-talk reports can systematically allocate the prize to the player who values it more highly at a lower resource cost than is entailed in equilibrium play of the war of attrition. Costly signaling in the form of burning money can effectively supplant the war of attrition as a means of allocating the prize, but it requires the same expected equilibrium resource expenditures, with the same expected distribution across types, as does the war of attrition. Thus, in spite of players’ unanimous preference for a system in which types are made known, and in spite of their disclosing type in equilibrium when type is verifiable, they nonetheless expend resources to credibly communicate their types when type is not verifiable, and the resources expended are, on average, equivalent to those expended in a war of attrition.