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The costs of conflict

Author

Listed:
  • Smith, Adam C.
  • Houser, Daniel
  • Leeson, Peter T.
  • Ostad, Ramin

Abstract

Violent conflict destroys resources. It generates “destruction costs.” These costs have an important effect on individuals’ decisions to cooperate or conflict. We develop two models of conflict: one in which conflict's destruction costs are independent of individuals’ investments in “arms”—the tools of conflict—and another in which conflict's destruction costs depend on those investments. Our models demonstrate that when conflict's destruction costs are arms-dependent, conflict is more costly, making cooperation more likely. We test this prediction with a laboratory experiment in which subjects first choose how heavily to invest in arms and then choose whether to cooperate or conflict in an environment where interaction is repeated. In one set of treatments conflict's destruction costs are arms-independent. In another they are arms-dependent. Our experimental results support our models’ predictions. Compared to when conflict's destruction costs are arms-independent, when those costs are arms-dependent, cooperation increases by nearly a third.

Suggested Citation

  • Smith, Adam C. & Houser, Daniel & Leeson, Peter T. & Ostad, Ramin, 2014. "The costs of conflict," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 61-71.
  • Handle: RePEc:eee:jeborg:v:97:y:2014:i:c:p:61-71
    DOI: 10.1016/j.jebo.2013.10.005
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Herbst, Luisa & Konrad, Kai A. & Morath, Florian, 2017. "Balance of power and the propensity of conflict," Games and Economic Behavior, Elsevier, vol. 103(C), pages 168-184.
    2. repec:bla:ecinqu:v:55:y:2017:i:1:p:479-500 is not listed on IDEAS
    3. David Hebert, 2015. "John J. Pitney and John-Clark Levin, Private anti-piracy navies: How warships for hire are changing maritime security," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 28(3), pages 365-369, September.
    4. Erik O. Kimbrough & Kevin Laughren & Roman Sheremeta, 2017. "War and Conflict in Economics: Theories, Applications, and Recent Trends," Discussion Papers dp17-10, Department of Economics, Simon Fraser University.
    5. McBride, Michael & Skaperdas, Stergios, 2014. "Conflict, settlement, and the shadow of the future," Journal of Economic Behavior & Organization, Elsevier, vol. 105(C), pages 75-89.
    6. Lacomba, Juan A. & Lagos, Francisco & Reuben, Ernesto & van Winden, Frans, 2014. "On the escalation and de-escalation of conflict," Games and Economic Behavior, Elsevier, vol. 86(C), pages 40-57.
    7. repec:cai:repdal:redp_273_0307 is not listed on IDEAS

    More about this item

    Keywords

    Conflict; Anarchy; Experimental economics; Political economy;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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