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

Benjamin Kang and James Unwin

Papers from arXiv.org

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.

Date: 2020-02
New Economics Papers: this item is included in nep-cis and nep-des
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