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Conflict Resolution under Asymmetric Information

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  • Helmut Bester

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  • Karl Warneryd

Abstract

We consider mechanisms for resolving conflicts between two agents who are uncertain about each other's fighting potential. Applications include international conflict, litigation, and elections. Even though only a peaceful agreement avoids a loss of resources, if this loss is small enough, then any mechanism must assign a positive probability of conflict. We show how the likelihood of conflict outbreak depends on the distribution of power between the agents and their information about each other.

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Paper provided by Departmental Working Papers in its series Papers with number 006.

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Handle: RePEc:bef:lsbest:006

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Keywords: conflict; asymmetric information;

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  1. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  3. Mailath, George J & Postlewaite, Andrew, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 351-67, July.
  4. Roger B. Myerson, 1977. "Incentive Compatability and the Bargaining Problem," Discussion Papers 284, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Skaperdas, S. & Syropoulos, C., 1996. "Insecure Properties and the Stability of Exchange," Papers 95-96-8, California Irvine - School of Social Sciences.
  6. Joseph Farrell., 1987. "Information and the Coase Theorem," Economics Working Papers 8747, University of California at Berkeley.
  7. Klibanoff, Peter & Morduch, Jonathan, 1995. "Decentralization, Externalities, and Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 223-47, April.
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Cited by:
  1. Garfinkel, M.R. & Skaperdas, S., 2000. "Conflict without Misperceptions or Incomplete Information: how the Future Matters," Papers 99-00-11, California Irvine - School of Social Sciences.
  2. Skaperdas, Stergios, 2003. "Restraining the genuine homo economicus: why the economy cannot be divorced from its governance," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-03, Social Science Research Center Berlin (WZB).
  3. Santiago Sanchez-Pages, 2004. "Conflict as a Part of the Bargaining Process: Theory and Empirical Evidence," ESE Discussion Papers 129, Edinburgh School of Economics, University of Edinburgh.
  4. Peter Stauvermann, 2002. "Why is there so much Peace?," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(1), pages 61-75.

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