A Sequential Concession Game with Asymmetric Information

The 2-player game analyzed is characterized by asymmetric information about the outcome of the game at the end point, (some finite point in time). While the description suggests that the problem is a variant of the game of attrition, it differs from the standard game of attrition in 2 respects: 1. The game is formulated in discrete time. 2. The game is analyzed in a setting of asymmetric information. The sequential Bayesian equilibrium is used as the appropriate solution concept. Besides asymmetric information, other key features of the situation are that full information will be revealed at the end of the bargaining time and that compromises are not possible. Equilibrium strategies entail that, at the beginning of the game, the informed player concedes with some large probability, and then players concede with probabilities that make their opponents indifferent between conceding at the next decision point or proceeding for one more period. The efficiency of the equilibrium is analyzed.