Arbeitspapier

A war of attrition with experimenting players

A standard incomplete-information war of attrition is extended to incorporate experimentation and private learning. 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 can get the better end of the deal, implying that slow learning can be a blessing in this type of competition. Our analysis gives insight into why an apparently inferior technology often survives in many standards competitions and more broadly offers implications for technology adoption and industry dynamics. We also show that there is a non-degenerate set of parameters that can support the Pareto-efficient allocation as an equilibrium outcome whereas it is never possible in the standard setup.

Language
Englisch

Bibliographic citation
Series: ISER Discussion Paper ; No. 1014

Classification
Wirtschaft
Asymmetric and Private Information; Mechanism Design
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Subject
war of attrition
bandit problem
experimentation
standards competitions
private learning

Event
Geistige Schöpfung
(who)
Chen, Chia-Hui
Ishida, Junichiro
Event
Veröffentlichung
(who)
Osaka University, Institute of Social and Economic Research (ISER)
(where)
Osaka
(when)
2017

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Chen, Chia-Hui
  • Ishida, Junichiro
  • Osaka University, Institute of Social and Economic Research (ISER)

Time of origin

  • 2017

Other Objects (12)