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The Social Benefit of War

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  • Hoffmann, Magnus
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    Abstract

    Recent findings in economic theory show that cooperation (settlement) between two identical players with conflicting interests in a valuable and contestable resource always Pareto dominates violent dispute (war), given that cooperation is presented using a symmetric bargaining norm. Necessary conditions for settlement to arise are the destructibility of war, and the costless and exogenous enforcement of any agreement made by the two players. We show that endogenous enforcement of the agreements alters the incentives of the players to bargain. This causes a shift in the Pareto frontier so that - under certain conditions - war Pareto dominates settlement.

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    File URL: http://mpra.ub.uni-muenchen.de/6196/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6196.

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    Date of creation: Oct 2007
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    Handle: RePEc:pra:mprapa:6196

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    Keywords: contests; property rights; endogenous enforcement; bargaining;

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    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. Garfinkel, Michelle R, 1990. "Arming as a Strategic Investment in a Cooperative Equilibrium," American Economic Review, American Economic Association, vol. 80(1), pages 50-68, March.
    3. Anbarci, N. & Skaperdas, S. & Syropoulos, C., 2000. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms Against Threats Can Have Real Effects," Papers 00-01-19, California Irvine - School of Social Sciences.
    4. Crawford, Vincent P, 1981. "Arbitration and Conflict Resolution in Labor-Management Bargaining," American Economic Review, American Economic Association, vol. 71(2), pages 205-10, May.
    5. Daron Acemoglu & Jorn-Steffen Pischke, 1998. "The Structure of Wages and Investment in General Training," NBER Working Papers 6357, National Bureau of Economic Research, Inc.
    6. Herschel I. Grossman, 2001. "The Creation of Effective Property Rights," American Economic Review, American Economic Association, vol. 91(2), pages 347-352, May.
    7. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-18, May.
    8. Michael McBride & Stergios Skaperdas, 2005. "Explaining Conflict in Low-Income Countries: Incomplete Contracting in the Shadow of the Future," Working Papers 050606, University of California-Irvine, Department of Economics.
    9. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    10. Cai Hongbin, 2003. "War or Peace," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-28, February.
    11. 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.
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    Cited by:
    1. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
      [ENDOGENOUS BOUNDARIES AND DISTRIBUTION O
      ," MPRA Paper 16473, University Library of Munich, Germany.

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