UCL School of Management is delighted to welcome Dharma Kwon, University of Illnois, to host a research seminar on ‘Game of investment in common goods: Stochastic war of attrition’.
We study the impact of stochasticity on a war of attrition in the context of investment in common goods. Our work is motivated by manufacturers’ investment in common suppliers to improve the quality of supplied parts. Due to the spillover of knowledge, one firm’s (manufacturer’s) investment benefits the other firms that source from the same supplier. Hence, the game between the firms is a war of attrition. In this work, we characterize the equilibria of this stochastic dynamic game and obtain the conditions under which mixed strategy equilibria are unstable. We discuss possible strategies of the firms or the supplier to mitigate the problem of mixed strategy equilibria.