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Conflict Resolution Under Asymmetric Information

Author

Listed:
  • Bester, Helmut

    (Department of Economics, Free University of Berlin)

  • Wärneryd, Karl

    () (Dept. of Economics, Stockholm School of Economics)

Abstract

We consider Bayesian incentive compatible and individually rational mechanisms for resolving conflicts between two agents who are uncertain about each other's fighting potential. We model the default option of outright conflict as a probabilistic contest. Examples of such contests may be international conflict, litigation, and elections. We show, in particular, that if the loss of surplus from outright conflict is small enough, then any mechanism must assign a positive probability of conflict. This happens even though only a peaceful agreement avoids a loss of resources.

Suggested Citation

  • Bester, Helmut & Wärneryd, Karl, 1998. "Conflict Resolution Under Asymmetric Information," SSE/EFI Working Paper Series in Economics and Finance 264, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0264
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    References listed on IDEAS

    as
    1. Farrell, Joseph, 1987. "Information and the Coase Theorem," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 113-129, Fall.
    2. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    3. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    4. George J. Mailath & Andrew Postlewaite, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 351-367.
    5. Skaperdas, S. & Syropoulos, C., 1996. "Insecure Properties and the Stability of Exchange," Papers 95-96-8, California Irvine - School of Social Sciences.
    6. 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, vol. 103(6), pages 1275-1288, December.
    7. Peter Klibanoff & Jonathan Morduch, 1995. "Decentralization, Externalities, and Efficiency," Review of Economic Studies, Oxford University Press, vol. 62(2), pages 223-247.
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    Citations

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    Cited by:

    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. Santiago Sanchez-Pages, 2004. "Conflict as a Part of the Bargaining Process: Theory and Empirical Evidence," ESE Discussion Papers 129, Edinburgh School of Economics, University of Edinburgh.
    3. Peter Stauvermann, 2002. "Why is there so much Peace?," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(1), pages 61-75.
    4. Stergios Skaperdas, 2003. "Restraining the Genuine Homo Economicus: Why the Economy Cannot Be Divorced from Its Governance," Economics and Politics, Wiley Blackwell, vol. 15(2), pages 135-162, July.

    More about this item

    Keywords

    Conflict; asymmetric information; mechanism design; contests.;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • 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
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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