Conflict as a Part of the Bargaining Process: Theory and Empirical Evidence
AbstractThis paper explores the role of conflict as a bargaining tool. It first presents a simple bargaining model with one-sided incomplete information. Parties can choose the scope of the confrontation they may want to engage in: A limited conflict that only introduces delay, or an absolute conflict that terminates the game. The outcomes of both types of confrontation are driven by the relative strength of the parties that is only known to one of them. Therefore, the non-final conflict conveys information about the eventual outcome of the absolute one. In this framework, it is shown that confrontation has a double-edged effect: It may paradoxically open the door to agreement when the uninformed party is so optimistic that no agreement is feasible. But it can also create inefficiency when agreement is possible but the informed agent has an incentive to improve her bargaining position by fighting. The second part of the paper performs a duration analysis on a sample of colonial and imperial wars fought between 1817 and 1988. The results offer evidence illustrating the use of conflict in negotiations.
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Bibliographic InfoPaper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 129.
Date of creation: Nov 2004
Date of revision:
Conflict; Bargaining; Incomplete information; Duration analysis.;
Find related papers by JEL classification:
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
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