A Dynamic Model of Conflict and Cooperation

Abstract

We introduce a common-pool contest into a continuous-time, differential game setting to model the dynamic behavior of agents facing a trade-off between socially productive activities and appropriation. We are able to identify multiple Markov perfect equilibrium strategies that are nonlinear in a state space, thus leading the economy to a state where epartial cooperationf occurs. We show that such cooperation can be seen as a response to conflict. We also discuss the consequences of changes in the effectiveness of appropriation, the number of contenders, and the rate of time preferences on contest equilibria.Conflict, Cooperation, Differential Game, Markov Perfect Equilibrium, Nonlinear Markov strategy