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The Absence of Attrition in a War of Attrition under Complete Information

George Georgiadis, Youngsoo Kim and H. Dharma Kwon

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Abstract: We consider a two-player game of war of attrition under complete information. It is well-known that this class of games admits equilibria in pure, as well as mixed strategies, and much of the literature has focused on the latter. We show that if the players' payoffs whilst in "war" vary stochastically and their exit payoffs are heterogeneous, then the game admits Markov Perfect equilibria in pure strategies only. This is true irrespective of the degree of randomness and heterogeneity, thus highlighting the fragility of mixed-strategy equilibria to a natural perturbation of the canonical model. In contrast, when the players' flow payoffs are deterministic or their exit payoffs are homogeneous, the game admits equilibria in pure and mixed strategies.

Date: 2021-10, Revised 2021-11
New Economics Papers: this item is included in nep-gth and nep-mic
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Published in Games and Economic Behavior, Volume 131, January 2022, Pages 171-185

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