Abstract
We study a dynamic game in which players compete for a prize. In a waiting
game with two-sided private information about strength levels, players choose
between fighting, fleeing, or waiting. Players earn a “deterrence value” on top
of the prize if their opponent escapes without a battle. We show that this value
is a key determinant of the type of equilibrium. For intermediate values, sorting
takes place with weaker and more loss averse players fleeing before others
fight. Time then helps to reduce battles. In an experiment, we find support for
the key theoretical predictions, and document suboptimal predatory fighting.
game with two-sided private information about strength levels, players choose
between fighting, fleeing, or waiting. Players earn a “deterrence value” on top
of the prize if their opponent escapes without a battle. We show that this value
is a key determinant of the type of equilibrium. For intermediate values, sorting
takes place with weaker and more loss averse players fleeing before others
fight. Time then helps to reduce battles. In an experiment, we find support for
the key theoretical predictions, and document suboptimal predatory fighting.
Original language | English |
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Place of Publication | Tilburg |
Publisher | CentER, Center for Economic Research |
Number of pages | 55 |
Volume | 2018-052 |
Publication status | Published - 18 Dec 2018 |
Publication series
Name | CentER Discussion Paper |
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Volume | 2018-052 |
Keywords
- fight-or-flight
- contest
- sorting
- loss aversion
- theory
- experiment