All-pay war |
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| Authors: | Roland Hodler Hadi Yekta? |
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| Institution: | 1. Study Center Gerzensee, 3115 Gerzensee, Switzerland;2. Department of Economics, University of Melbourne, VIC 3010, Australia;3. Department of Economics, Zirve University, K?z?lhisar Campus, 27260 Gaziantep, Turkey;1. Virginia Commonwealth University, 301 W. Main Street, Box 844000, Richmond, VA 23284-4000, United States;2. Bentley University, 175 Forest Street, Waltham, MA 02452-4705, United States;1. Department of Mathematics, Guangdong University of Education, Guangzhou 510640, PR China;2. Department of Applied Mathematics, Beijing University of Technology, Beijing 100124, PR China;1. Jan Kochanowski University in Kielce, Poland;2. Yurii Fedkovych Chernivtsi National University, Ukraine;1. Samovar, Télécom Sudparis, CNRS, University Paris-Saclay, Evry, France;2. Normandie Université, UNICAEN, LMNO CNRS UMR 6139, Université de Caen, 14032 Caen Cedex, France |
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| Abstract: | We study a model of conflicts and wars in which the outcome is uncertain not because of luck on the battlefield as in standard models, but because countries lack information about their opponent. In this model expected resource levels and production and military technologies are common knowledge, but realized resource levels are private information. Each country decides how to allocate its resources to production and warfare. The country with the stronger military wins and receives aggregate production. In equilibrium both comparative and absolute advantages matter: a larger resource share is allocated to warfare by the country with a comparative advantage in warfare at relatively low realized resource levels, and by the country with an absolute disadvantage in warfare at relatively high realized resource levels. From an ex-ante perspective the country with a comparative advantage in warfare is more likely to win the war unless its military potential is much lower. |
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