The Generalized War of Attrition

Abstract

We model a war of attrition with N + K firms competing for N prizes. In a “natural oligopoly” context, the K − 1 lowest-value firms drop out instantaneously, even though each firm's value is private information to itself. In a “standard setting” context, in which every competitor suffers losses until a standard is chosen, even after giving up on its own preferred alternative, each firm's exit time is independent both of K and of other players' actions. Our results explain how long it takes to form a winning coalition in politics. Solving the model is facilitated by the Revenue Equivalence Theorem. (JEL D43, D44, L13, O30)