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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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    References

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    1. Michael McBride & Stergios Skaperdas, 2005. "Explaining Conflict in Low-Income Countries: Incomplete Contracting in the Shadow of the Future," CESifo Working Paper Series 1636, CESifo Group Munich.
    2. Acemoglu, D. & Pischke, J.S., 1997. "The Structure of Wages and Investment in General Training," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 97-24, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Garfinkel, Michelle R, 1990. "Arming as a Strategic Investment in a Cooperative Equilibrium," American Economic Review, American Economic Association, American Economic Association, vol. 80(1), pages 50-68, March.
    4. Herschel Grossman, 2000. "The Creation of Effective Property Rights," Working Papers 2000-15, Brown University, Department of Economics.
    5. Garfinkel, M.R. & Skaperdas, S., 2000. "Conflict without Misperceptions or Incomplete Information: how the Future Matters," Papers, California Irvine - School of Social Sciences 99-00-11, California Irvine - School of Social Sciences.
    6. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, Econometric Society, vol. 43(3), pages 513-18, May.
    7. Crawford, Vincent P, 1981. "Arbitration and Conflict Resolution in Labor-Management Bargaining," American Economic Review, American Economic Association, American Economic Association, vol. 71(2), pages 205-10, May.
    8. Anbarci, N. & Skaperdas, S. & Syropoulos, C., 2000. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms Against Threats Can Have Real Effects," Papers, California Irvine - School of Social Sciences 00-01-19, California Irvine - School of Social Sciences.
    9. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, American Economic Association, vol. 71(5), pages 896-908, December.
    10. 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, University of Chicago Press, vol. 103(6), pages 1275-88, December.
    11. Cai Hongbin, 2003. "War or Peace," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 2(1), pages 1-28, February.
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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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