TO PREY OR NOT TO PREY? WELFARE AND INDIVIDUAL LOSSES IN A CONFLICT MODEL1
Martin Wittenberg ()
South African Journal of Economics, 2008, vol. 76, issue 2, 239-265
We analyse a generalised form of the Hirshleifer‐Skaperdas predation model. In such a model agents have a choice between productive work and appropriation. We suggest that such a model can usefully be thought of as a continuous form of the Prisoners' Dilemma. We present closed form solutions for the interior equilibria and comparative statics for all Cournot equilibria and analyse the social welfare losses arising from predation. We show that predation is minimised under two quite different regimes, one in which claiming is very ineffective and another in which one of the players becomes marginalised. The worst outcomes seem to arise when claiming is effective, but inequality in power is significant but not extreme. This, arguably, is the situation in a number of transition societies.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:sajeco:v:76:y:2008:i:2:p:239-265
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