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All-Pay Auctions as Models for Trade Wars and Military Annexation

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  • Benjamin Kang
  • James Unwin

Abstract

We explore an application of all-pay auctions to model trade wars and territorial annexation. Specifically, in the model we consider the expected resource, production, and aggressive (military/tariff) power are public information, but actual resource levels are private knowledge. We consider the resource transfer at the end of such a competition which deprives the weaker country of some fraction of its original resources. In particular, we derive the quasi-equilibria strategies for two country conflicts under different scenarios. This work is relevant for the ongoing US-China trade war, and the recent Russian capture of Crimea, as well as historical and future conflicts.

Suggested Citation

  • Benjamin Kang & James Unwin, 2020. "All-Pay Auctions as Models for Trade Wars and Military Annexation," Papers 2002.03492, arXiv.org.
    • Handle: RePEc:arx:papers:2002.03492
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    File URL: http://arxiv.org/pdf/2002.03492
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