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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

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    File URL: http://www.gmu.edu/schools/chss/economics/icesworkingpapers.gmu.edu/pdf/1082.pdf
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    References listed on IDEAS

    as
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    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

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