Lecture 20 - Subgame Perfect Equilibrium: Wars of Attrition

We first play and then analyze wars of attrition; the games that afflict trench warfare, strikes, and businesses in some competitive settings. We find long and damaging fights can occur in class in these games even when the prizes are small in relation to the accumulated costs. These could be caused by irrationality or by players’ having other goals like pride or reputation. But we argue that long, costly fights should be expected in these games even if everyone is rational and has standard goals. We show this first in a two-period version of the game and then in a potentially infinite version. There are equilibria in which the game ends fast without a fight, but there are also equilibria that can involve long fights. The only good news is that, the longer the fight and the higher the cost of fighting, the lower is the probability of such a fight.

You can listen to Lecture 20 - Subgame Perfect Equilibrium: Wars of Attrition online on Radio and Podcast. Open the player on this page to stream the available audio.

Lecture 20 - Subgame Perfect Equilibrium: Wars of Attrition is an episode from Yale Open Courses ECON 159: Game Theory by William Sheppard.

This episode is 01:15:36 long.

This episode was published on Jun 8, 2018.

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