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Conflict as a Part of the Bargaining Process: Theory and Empirical Evidence

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Abstract

This 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 Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 129.

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Length: 34
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:edn:esedps:129

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Keywords: Conflict; Bargaining; Incomplete information; Duration analysis.;

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References

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  1. Anbarci, Nejat & Skaperdas, Stergios & Syropoulos, Constantinos, 2002. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects," Journal of Economic Theory, Elsevier, vol. 106(1), pages 1-16, September.
  2. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  3. Kennan, John & Wilson, Robert, 1989. "Strategic Bargaining Models and Interpretation of Strike Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages S87-130, Supplemen.
  4. Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002. "Bargaining with Incomplete Information," Papers of Peter Cramton 02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001.
  5. Joan Esteban & József Sákovics, 2003. "Endogenous bargaining power," Working Papers 13, Barcelona Graduate School of Economics.
  6. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
  7. Mnookin, Robert & Wilson, Robert, 1998. "A Model of Efficient Discovery," Games and Economic Behavior, Elsevier, vol. 25(2), pages 219-250, November.
  8. Raquel Fernandez & Jacob Glazer, 1989. "Striking for a Bargain Between Two Completely Informed Agents," NBER Working Papers 3108, National Bureau of Economic Research, Inc.
  9. repec:fth:harver:1432 is not listed on IDEAS
  10. Horowitz, Andrew W, 1993. "Time Paths of Land Reform: A Theoretical Model of Reform Dynamics," American Economic Review, American Economic Association, vol. 83(4), pages 1003-10, September.
  11. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
  12. Helmut Bester & Karl Warneryd, . "Conflict Resolution under Asymmetric Information," Papers 006, Departmental Working Papers.
  13. Schnell, John F & Gramm, Cynthia L, 1987. "Learning by Striking: Estimates of the Teetotaler Effect," Journal of Labor Economics, University of Chicago Press, vol. 5(2), pages 221-41, April.
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Cited by:
  1. Stergios Skaperdas, 2008. "An economic approach to analyzing civil wars," Economics of Governance, Springer, vol. 9(1), pages 25-44, January.

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