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1 - conditional probability that opponent concedes
2 - gain if opponent concedes
Alesina Drazen (1991) - Why Are Stabilizations Delayed (view source)
Revision as of 22:39, 25 May 2010
, 22:39, 25 May 2010no edit summary
Proposition 1 states that there exists a symmetric Nash equilbirum with each group's concession function described by <math>T(\theta)\,</math> where <math>T(\theta)\,</math> is implicitly defined by:
:<math>\underbrace{\underbrace{\left(-\frac{f(\theta)}{F(\theta)}\frac{1}{t'(\theta)}\right)}_{\mbox{conditional probability that opponent concedesA1}}\underbrace{\frac{2 \alpha -1}{r}}_{\mbox{gain if opponent concedesA2}}}_{\mbox{benefit of waiting another instant to concedeA}}= \underbrace{\gamma (\theta + \frac{1}{2} - \alpha)}_{\mbox{cost of waiting another instant to concedeB}}\,</math> Where: A1 - conditional probability that opponent concedes A2 - gain if opponent concedes
A - benefit of waiting another instant to concede
B - cost of waiting another instant to concede
The intuition for a group with <math>\theta < \overline{\theta}\,</math> is a follows:
