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Free keywords:
Dynamic conflict, Lottery contest, Heterogeneity, Incomplete information, Uncertainty, Escalation, Beliefs, Selection, Learning, Social projection, Experiment
Abstract:
We study learning and selection and their implications for possible effort escalation in a simple game of dynamic property rights conflict: a multi-stage contest with random resolve. Accounting for the empirically well-documented heterogeneity of behavioral motives of players in such games turns the interaction into a dynamic game of incomplete information. In contrast to the standard benchmark with complete information, the perfect Bayesian equilibrium features social projection and type-dependent escalation of efforts caused by learning. A corresponding experimental setup provides evidence for type heterogeneity, for belief formation and updating, for self-selection and for escalation of efforts in later stages.
