Coalitional Colonel Blotto Games with Application to the Economics of Alliances

This paper examines a multi-player and multi-front Colonel Blotto game in which one player, A, simultaneously competes in two disjoint Colonel Blotto games, against two separate opponents, 1 and 2. Prior to competing in the games, players 1 and 2 have the opportunity to form an alliance to share their endowments of a one-dimensional resource (e.g., troops, military hardware, money). This paper examines non-cooperative alliances in which only individually rational ex ante transfers of the resource are allowed. Once these transfers take place, each alliance member maximizes his payoff in his respective Colonel Blotto game, given his resource constraint and player A s allocation of its endowment across the two games. No ex post transfers are enforceable. Remarkably, there are several ranges of parameters in which endogenous unilateral transfers take place within the alliance. That is, one player gives away resources to his ally, who happily accepts the gift. Unilateral transfers arise because they lead to a strategic shift in the common opponent s force allocation away from the set of battlefields of the player making the transfer, towards the set of battlefields of the player receiving the transfer. Our result demonstrates that there exist unilateral transfers for which the combination of direct and strategic effects benefits both allies. This stands in stark contrast to the previous literature on alliances (see Sandler and Hartley, 2001), which relies on the assumption of pure or impure public goods.