All-Pay Auctions as Models for Trade Wars and Military Annexation

Document pages: 5 pages

Abstract: We explore an application of all-pay auctions to model trade wars andterritorial annexation. Specifically, in the model we consider the expectedresource, production, and aggressive (military tariff) power are publicinformation, but actual resource levels are private knowledge. We consider theresource transfer at the end of such a competition which deprives the weakercountry of some fraction of its original resources. In particular, we derivethe quasi-equilibria strategies for two country conflicts under differentscenarios. This work is relevant for the ongoing US-China trade war, and therecent Russian capture of Crimea, as well as historical and future conflicts.