Side-payments and the costs of conflict
Erik Kimbrough and
Roman Sheremeta
International Journal of Industrial Organization, 2013, vol. 31, issue 3, 278-286
Abstract:
Conflict and competition often impose costs on both winners and losers, and conflicting parties may prefer to resolve a dispute before it occurs. The equilibrium of a conflict game with side-payments predicts that with binding 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, 87% of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 39% of gains come from avoided conflicts and 61% from reduced conflict expenditures.
Keywords: Contests; Conflict resolution; Side-payments; Experiments (search for similar items in EconPapers)
JEL-codes: C72 C91 D72 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (60)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167718712000306
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Side-Payments and the Costs of Conflict (2013) 
Working Paper: Side-Payments and the Costs of Conflict (2012) 
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:eee:indorg:v:31:y:2013:i:3:p:278-286
DOI: 10.1016/j.ijindorg.2012.01.005
Access Statistics for this article
International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal
More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).