Bargaining in the shadow of conflict: resource division and War’s Inefficiency Puzzle in the commons

Jeremy Kettering () and Shane Sanders ()
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Jeremy Kettering: University of Rochester
Shane Sanders: Syracuse University

Public Choice, 2024, vol. 199, issue 1, No 6, 83-101

Abstract: Abstract This study examines War’s Inefficiency Puzzle in a resource bargaining model, where the nature of the resource (e.g., water or land) can influence resource division valuation. In the model, an embedded resource conflict or contest model equilibrium constitutes the disagreement point. We first show that the Puzzle holds across all winner-take-all conflict forms in a generalized family given a standard bargaining (in the shadow of conflict) framework. When introducing resource division discounts, we find conditions in which a bargaining solution does not exist such that conflict is chosen over settlement. Resource division discounts can cause conflict to be chosen over any settlement point in the feasible set, thus providing a solution to War’s Inefficiency Puzzle. This solution does not assume that a resource cannot be divided. It only assumes that division may lead to division discounts. We then consider a generalization of a classic tragedy of the commons model and find that division of an innate commons leads to division discounts as an equilibrium outcome.

Keywords: Settlement; Resource conflict; Non-convex bargaining problems; War’s Inefficiency Puzzle; Tragedy of the commons (search for similar items in EconPapers)
JEL-codes: C71 C72 C78 D74 F51 H56 Q34 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11127-023-01074-9

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