Conflict and Conflict Managment with Asymmetric Stakes (The Bad-Cop and the Good Cop part II)

Abstract

This paper considers a partial equilibrium model of conflict where two asymmetric, rational and risk-neutral opponents evaluate differently the contested stake. Differently from common contest models, agents have the option of choosing a second instrument to affect the outcome of the conflict. The second instrument is assumed to capture positive investments in ‘conflict management’ - labelled as ‘talks’. It will be demonstrated that, under some conditions, an asymmetry in the evaluation of the stake can lead to a concession from one agent to the other. In particular, the agent with the higher evaluation of the stake would make a concession, proportional to the optimal choice of ‘talks’ . The existence of a concession paves the way for establishing a feasible settlement region (FSR) given that both parties can be better off while expending resources in ‘talks’. Eventually the basic model is extended in order to consider the existence of asymmetries in technological capabilities. Whenever the agents exhibit sufficiently asymmetric productive characteristics a FSR can be established even if a concession is not ensured. However a concession can enlarge the FSR. Finally, throughout the paper, the concept of entropy is applied as a tool for the measurement and evaluation of conflict andConflict; Contest; Conflict management; Asymmetry in evaluation; Entropy; Returns to Scale; Concession; Guns; Talks