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The Effects of Conflict Budget on the Intensity of Conflict: An Experimental Investigation

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  • Kyung Hwan Baik
  • Subhasish M. Chowdhury
  • Abhijit Ramalingam

Abstract

We experimentally investigate the effects of conflict budget on conflict intensity. We run a between-subjects Tullock contest in which we vary the contest budget from Low to Medium to High, while keeping the risk-neutral Nash equilibrium bid the same. We find a non-monotonic relationship: bids increase when the budget increases from Low to Medium, but decrease when the budget further increases from Medium to High. This can happen for players with concave utility, if a high budget has a wealth effect that reduces the marginal utility of winning resulting in lower bids. To test this, we run a Wealth treatment in which the budget remains the Medium, but contestants receive a fixed payment (as wealth) independent of the contest outcome. The bids in the Wealth treatment are lower than the Medium treatment, but are not different from the High treatment, supporting the hypothesis of a wealth effect. We then support this empirical observation by a theoretical model with risk-aversion. Key Words: Conflict; Experiment; Budget constraint; Wealth effect

Suggested Citation

  • Kyung Hwan Baik & Subhasish M. Chowdhury & Abhijit Ramalingam, 2019. "The Effects of Conflict Budget on the Intensity of Conflict: An Experimental Investigation," Working Papers 19-06, Department of Economics, Appalachian State University.
  • Handle: RePEc:apl:wpaper:19-06
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    Cited by:

    1. Schroyen, Fred & Treich, Nicolas, 2016. "The power of money: Wealth effects in contests," Games and Economic Behavior, Elsevier, vol. 100(C), pages 46-68.
    2. Subhasish M. Chowdhury & Anwesha Mukherjee & Theodore L. Turocy, 2020. "That’s the ticket: explicit lottery randomisation and learning in Tullock contests," Theory and Decision, Springer, vol. 88(3), pages 405-429, April.
    3. Biljana Meiske, 2021. "Productivity Shocks and Conflict," Working Papers tax-mpg-rps-2021-18, Max Planck Institute for Tax Law and Public Finance.
    4. Nelson, Arthur B, 2020. "Deterrence in sequential contests: An experimental study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 86(C).
    5. Subhasish M. Chowdhury & Patricia Esteve-Gonzalez & Anwesha Mukherjee, 2020. "Heterogeneity, Leveling the Playing Field, and Affirmative Action in Contests," Munich Papers in Political Economy 06, TUM School of Governance at the Technical University of Munich.
    6. Subhasish M. Chowdhury & Anwesha Mukherjee & Theodore L. Turocy, 2021. "And the first runner-up is...: Sequential versus simultaneous winner revelation in multi-winner discriminated Tullock contests," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 21-01, School of Economics, University of East Anglia, Norwich, UK..
    7. Arthur B. Nelson, 2019. "Deterrence in sequential contests: An experimental study," Working Papers wp2019_11_02, Department of Economics, Florida State University.

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    More about this item

    Keywords

    conflict; experiment; budget constraint; wealth effect;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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