Resource inequality in the war of attrition

Bingchao Huangfu (), Gagan Ghosh and Heng Liu ()
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Bingchao Huangfu: Nanjing Audit University
Heng Liu: University of Michigan

International Journal of Game Theory, 2023, vol. 52, issue 1, No 2, 33-61

Abstract: Abstract This paper studies a war of attrition in which players have private and asymmetric resource constraints. We show that resource inequality, measured by whether and by how much a player can fight longer than her opponent, is a key measure of strength in a war of attrition. In the unique equilibrium surviving a refinement, players with more resources always fight and players with fewer resources fight to develop a reputation of “deep pocket” until they deplete their resources. As a result, private resource constraints and resource inequality often exacerbate the outcome inequality. Furthermore, changes in resource inequality have a non-monotonic effect on the length of the war, which is consistent with empirical findings. Finally, we extend the results to the case with a continuum of resource levels to further examine the impact of resource inequality.

Keywords: Wars of attrition; Private resource constraints. (search for similar items in EconPapers)
JEL-codes: C78 D82 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s00182-022-00809-0

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