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The use of conflict as a bargaining tool against unsophisticated opponents

In this paper we explore the role of conflict as an informational device by means of a simple bargaining model with one-sided incomplete information: Limited conflicts reveal information about the outcome of the all-out conflict (that ends the game) because the outcomes of both types of confrontations are driven by the relative strength of the parties. We limit the analysis to the case where the uninformed party can learn the information transmitted in the battlefield but not the one conveyed by offers. The game becomes then an optimal stopping problem where the informed party has to decide at each period whether to stop, by reaching an agreement or by invoking total conflict, or to keep fighting. We show that conflict is a double-edge sword: It may paradoxically open the door to agreement when the uniformed party is too optimistic. But confrontation also occurs when agreement is possible but the informed agent has incentives to improve her bargaining position by fighting.

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Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 99.

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Length: 22
Date of creation: 2003
Date of revision:
Handle: RePEc:edn:esedps:99
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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. Joan Esteban & József Sákovics, 2002. "Endogenous bargaining power," Economics Working Papers 644, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  4. Sobel, Joel & Takahashi, Ichiro, 1983. "A Multistage Model of Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 50(3), pages 411-26, July.
  5. Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002. "Bargaining with Incomplete Information," Papers of Peter Cramton 02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001.
  6. Anbarci, Nejat & Skaperdas, Stergios & Syropoulos, Constantinos, 2002. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects," Journal of Economic Theory, Elsevier, vol. 106(1), pages 1-16, September.
  7. Darren Filson & Suzanne Werner, . "A Bargaining Model of War and Peace: Anticipating the Onset, Duration, and Outcome of War," Claremont Colleges Working Papers 2001-02, Claremont Colleges.
  8. Powell, Robert, 1996. "Bargaining in the Shadow of Power," Games and Economic Behavior, Elsevier, vol. 15(2), pages 255-289, August.
  9. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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