[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/gms/wpaper/1082.html
   My bibliography  Save this paper

Costly Waiting in Dynamic Contests: Theory and Experiment

Author

Listed:
  • Daniel Houser

    (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)

  • Jian Song

    (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)

Abstract
We extend the war of attrition by studying a three-period dynamic contest game. In our game, players can fight against their opponents at certain period of the contest and can flee at any time. Waiting is costly. We focus on the role of waiting costs and show that the value of waiting costs is a key factor in determining the type of equilibrium in such dynamic contests. Specifically, as waiting costs increase, contests end earlier, battles are less likely to occur, and the weaker player in a pair is more likely to flee. A lab experiment verifies most key features of our model. However, unlike theoretical predictions, we find that as waiting costs increase, the duration of contests and the frequency of battles fail to drop as significantly as theory predicted. Moreover, we find that in each treatment, individual players exit the contest significantly earlier than predicted.

Suggested Citation

  • Daniel Houser & Jian Song, 2021. "Costly Waiting in Dynamic Contests: Theory and Experiment," Working Papers 1082, George Mason University, Interdisciplinary Center for Economic Science.
    • Handle: RePEc:gms:wpaper:1082
    as

    Download full text from publisher

    File URL: http://www.gmu.edu/schools/chss/economics/icesworkingpapers.gmu.edu/pdf/1082.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hannah Hörisch & Oliver Kirchkamp, 2010. "Less fighting than expected," Public Choice, Springer, vol. 144(1), pages 347-367, July.
    2. Deck, Cary & Sheremeta, Roman, 2012. "Fight or Flight?," MPRA Paper 52130, University Library of Munich, Germany.
    3. van Leeuwen, Boris & Offerman, Theo & van de Ven, Jeroen, 2018. "Fight or Flight : Endogenous Timing in Conflicts," Discussion Paper 2018-052, Tilburg University, Center for Economic Research.
    4. Song, Jian & Houser, Daniel, 2021. "Non-exclusive group contests: An experimental analysis," Journal of Economic Psychology, Elsevier, vol. 87(C).
    5. Ryan Oprea & Bart J. Wilson & Arthur Zillante, 2013. "War Of Attrition: Evidence From A Laboratory Experiment On Market Exit," Economic Inquiry, Western Economic Association International, vol. 51(4), pages 2018-2027, October.
    6. Shakun D. Mago & Roman M. Sheremeta, 2019. "New Hampshire Effect: behavior in sequential and simultaneous multi-battle contests," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 325-349, June.
    7. Simon Gächter & Eric J. Johnson & Andreas Herrmann, 2022. "Individual-level loss aversion in riskless and risky choices," Theory and Decision, Springer, vol. 92(3), pages 599-624, April.
    8. Dominic Rohner & Mathias Thoenig & Fabrizio Zilibotti, 2013. "War Signals: A Theory of Trade, Trust, and Conflict," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(3), pages 1114-1147.
    9. Deck, Cary & Jahedi, Salar, 2015. "An experimental investigation of time discounting in strategic settings," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 54(C), pages 95-104.
    10. Dutcher, E. Glenn & Balafoutas, Loukas & Lindner, Florian & Ryvkin, Dmitry & Sutter, Matthias, 2015. "Strive to be first or avoid being last: An experiment on relative performance incentives," Games and Economic Behavior, Elsevier, vol. 94(C), pages 39-56.
    11. Gelder, Alan & Kovenock, Dan, 2017. "Dynamic behavior and player types in majoritarian multi-battle contests," Games and Economic Behavior, Elsevier, vol. 104(C), pages 444-455.
    12. Kimbrough, Erik O. & Laughren, Kevin & Sheremeta, Roman, 2020. "War and conflict in economics: Theories, applications, and recent trends," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 998-1013.
    13. Daniel Friedman & Kai Pommerenke & Rajan Lukose & Garrett Milam & Bernardo Huberman, 2007. "Searching for the sunk cost fallacy," Experimental Economics, Springer;Economic Science Association, vol. 10(1), pages 79-104, March.
    14. van Leeuwen, Boris & Offerman, Theo & van de Ven, Jeroen, 2018. "Fight or Flight : Endogenous Timing in Conflicts," Discussion Paper 2018-052, Tilburg University, Center for Economic Research.
    15. Faruk Gul & Wolfgang Pesendorfer, 2012. "The War of Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(2), pages 707-734.
      • Gul, Faruk & Pesendorfer, Wolfgang, 2010. "The War of Information," Papers 9-13-2010, Princeton University, Research Program in Political Economy.
    16. Abbink, Klaus & Brandts, Jordi & Herrmann, Benedikt & Orzen, Henrik, 2012. "Parochial altruism in inter-group conflicts," Economics Letters, Elsevier, vol. 117(1), pages 45-48.
    17. Paul Klemperer & Jeremy Bulow, 1999. "The Generalized War of Attrition," American Economic Review, American Economic Association, vol. 89(1), pages 175-189, March.
    18. Sandeep Baliga & David O. Lucca & Tomas Sjöström, 2011. "Domestic Political Survival and International Conflict: Is Democracy Good for Peace?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(2), pages 458-486.
    19. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
    20. Johannes Hörner & Nicolas Sahuguet, 2011. "A war of attrition with endogenous effort levels," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 1-27, May.
    21. Daron Acemoglu & Alexander Wolitzky, 2014. "Cycles of Conflict: An Economic Model," American Economic Review, American Economic Association, vol. 104(4), pages 1350-1367, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kimbrough, Erik O. & Laughren, Kevin & Sheremeta, Roman, 2020. "War and conflict in economics: Theories, applications, and recent trends," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 998-1013.
    2. Roman Sheremeta, 2018. "Experimental Research on Contests," Working Papers 18-07, Chapman University, Economic Science Institute.
    3. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    4. Shakun D. Mago & Roman M. Sheremeta, 2019. "New Hampshire Effect: behavior in sequential and simultaneous multi-battle contests," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 325-349, June.
    5. Song, Jian & Houser, Daniel, 2023. "Asymmetric shocks in contests: Theory and experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 243-267.
    6. Xue, Lian & Sitzia, Stefania & Turocy, Theodore L., 2023. "Concord and contention in a dynamic unstructured bargaining experiment with costly conflict," Journal of Economic Psychology, Elsevier, vol. 97(C).
    7. Deck, Cary & Sheremeta, Roman M., 2019. "The tug-of-war in the laboratory," European Journal of Political Economy, Elsevier, vol. 60(C).
    8. Shakun D. Mago & Roman M. Sheremeta, 2017. "Multi‐battle Contests: An Experimental Study," Southern Economic Journal, John Wiley & Sons, vol. 84(2), pages 407-425, October.
    9. Dan Kovenock & Brian Roberson & Roman M. Sheremeta, 2019. "The attack and defense of weakest-link networks," Public Choice, Springer, vol. 179(3), pages 175-194, June.
    10. Foster, Joshua, 2020. "Loss aversion and sunk cost sensitivity in all-pay auctions for charity: Theory and experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 84(C).
    11. Maxime Menuet & Petros G. Sekeris, 2022. "Engaging in Wars of Attrition," Annals of Economics and Statistics, GENES, issue 147, pages 79-100.
    12. van Leeuwen, Boris & Offerman, Theo & van de Ven, Jeroen, 2018. "Fight or Flight : Endogenous Timing in Conflicts," Discussion Paper 2018-052, Tilburg University, Center for Economic Research.
    13. Mago, Shakun D. & Sheremeta, Roman M. & Yates, Andrew, 2013. "Best-of-three contest experiments: Strategic versus psychological momentum," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 287-296.
    14. van Leeuwen, Boris & Offerman, Theo & van de Ven, Jeroen, 2018. "Fight or Flight : Endogenous Timing in Conflicts," Discussion Paper 2018-052, Tilburg University, Center for Economic Research.
    15. Zeynep B. Irfanoglu & Shakun D. Mago & Roman M. Sheremeta, 2014. "The New Hampshire Effect: Behavior in Sequential and Simultaneous Election Contests," Working Papers 14-15, Chapman University, Economic Science Institute.
    16. Lian Xue & Stefania Sitzia & Theodore L. Turocy, 2022. "Concord and contention in a dynamic unstructured bargaining experiment with costly conflict," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 22-02, School of Economics, University of East Anglia, Norwich, UK..
    17. Matija Kovacic & Claudio Zoli, 2021. "Ethnic distribution, effective power and conflict," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(2), pages 257-299, August.
    18. Juan Felipe Riaño & Felipe Valencia Caicedo, 2024. "Collateral Damage: The Legacy of the Secret War in Laos," The Economic Journal, Royal Economic Society, vol. 134(661), pages 2101-2140.
    19. Richard Bluhm & Martin Gassebner & Sarah Langlotz & Paul Schaudt, 2021. "Fueling conflict? (De)escalation and bilateral aid," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(2), pages 244-261, March.
    20. Gelder, Alan & Kovenock, Dan, 2017. "Dynamic behavior and player types in majoritarian multi-battle contests," Games and Economic Behavior, Elsevier, vol. 104(C), pages 444-455.

    More about this item

    Keywords

    Dynamic contest; Waiting cost; Frequency of battles; Lab experiment;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gms:wpaper:1082. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Shams Bahabib (email available below). General contact details of provider: https://edirc.repec.org/data/icgmuus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.