Make Him an Offer He Can’t Refuse: Avoiding Conflicts through Side Payments

Erik Kimbrough and Roman Sheremeta

Working Papers from Chapman University, Economic Science Institute

Abstract: The equilibrium of a two-stage conflict game with side-payments predicts that with binding stage-one offers, proposers make and responders accept side-payments, generating settlements that strongly favor proposers. When side-payments are non-binding, proposers offer nothing and conflicts always arise. Laboratory experiments confirm that binding side-payments reduce conflicts. However, 30% of responders reject binding offers, and offers are more egalitarian than predicted. Surprisingly, non-binding side-payments also improve efficiency, although less than binding. With binding side-payments, 98% of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 49% of gains come from avoided conflicts and 51% from reduced conflict expenditures.

Keywords: contest; conflict resolution; side payments; experiments (search for similar items in EconPapers)
JEL-codes: C72 C91 D72 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010
New Economics Papers: this item is included in nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.chapman.edu/ESI/wp/Kimbrough-Sheremeta-MakeHimAnOffer.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:10-23

Access Statistics for this paper

More papers in Working Papers from Chapman University, Economic Science Institute Contact information at EDIRC.
Bibliographic data for series maintained by Megan Luetje ().