Karl Wärneryd

We consider two-player, perfectly discriminatory, common-value contests (or all-pay auctions), in which one player knows the value of the contested object with certainty, and the other knows only its prior distribution. We show, among other things, that in equilibrium the players win with equal probability. This contrasts with a large class of imperfectly discriminatory contests in which the uninformed player wins with a strictly greater probability than the informed player.

We consider imperfectly discriminating, common-value, all-pay auctions (or contests) in which some players know the value of the prize, others do not. We show that if the prize is always of positive value, then all players are active in equilibrium. If the prize is of value zero with positive probability, then there is some threshold number of informed players such that if there are less, all uninformed players are active, and otherwise all uninformed players are inactive.

This article analyzes informational issues that emerge in a contest model of conflict, a model in which the outcome of open conflict depends on the relative military capabilities of the adversaries using a traditional Bayesian game-theoretic approach. It provides an introduction to the topic along with insights into how conflict can emerge in settings with informational asymmetries. The article deals with issues of asymmetric information about players' utility from winning; their costs of producing effort; abilities; and what private information about aggressive potential implies for the probability of outbreak of outright conflict instead of peaceful settlement.