 A War of Attrition with Experimenting PlayersChia‐Hui Chen and Junichiro Ishida Journal of Industrial Economics, 2021, vol. 69, issue 2, 239-269 Abstract: A standard incomplete‐information war of attrition is extended to incorporate experimentation. We obtain a characterization of all equilibria in this extended setup and use this setup to illuminate a tradeoff between short‐run and long‐run gains of experimentation. The extension yields qualitative impacts on the strategic nature of the problem. The option value of experimentation serves as a credible commitment device to stay in the game, which is instrumental in inducing the other player to concede earlier. As a direct consequence, there may be an equilibrium in which the strictly less efficient player, but with a higher margin of experimentation, can get the better end of the deal. This result leads to an important empirical implication since the margin of experimentation is not directly observable, even ex post. Our analysis also gives insight into why an apparently inferior technology often survives in standards competitions and more broadly offers implications for technology adoption and industry dynamics. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jindec:v:69:y:2021:i:2:p:239-269 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven More articles in Journal of Industrial Economics from Wiley Blackwell |
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