@techreport{Konrad2005Equilibrium,
abstract = {We characterize the unique Markov perfect equilibrium of a tug-of-war without exogenous
noise, in which players have the opportunity to engage in a sequence of battles in an attempt
to win the war. Each battle is an all-pay auction in which the player expending the greater
resources wins. In equilibrium, contest effort concentrates on at most two adjacent states of
the game, the "tipping states", which are determined by the contestants' relative strengths,
their distances to final victory, and the discount factor. In these states battle outcomes are
stochastic due to endogenous randomization. Both relative strength and closeness to victory
increase the probability of winning the battle at hand. Patience reduces the role of distance in
determining outcomes.
Applications range from politics, economics and sports, to biology, where the equilibrium
behavior finds empirical support: many species have developed mechanisms such as
hierarchies or other organizational structures by which the allocation of prizes are governed
by possibly repeated conflict. Our results contribute to an explanation why. Compared to a
single-stage conflict, such structures can reduce the overall resources that are dissipated
among the group of players.},
author = {Kai A. Konrad and Dan Kovenock},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {D74; D72; 330; winner-take-all; all-pay auction; tipping; multi-stage contest; dynamic game; preemption; conflict; dominance; Auktion; Verhandlungstheorie; Rationales Verhalten; Wettbewerbstheorie; Dynamisches Spiel; Theorie},
language = {eng},
number = {1564},
title = {Equilibrium and efficiency in the tug-of-war},
type = {CESifo working papers},
url = {http://hdl.handle.net/10419/19028},
year = {2005}
}
