Conflict Resolution Under Asymmetric Information

Helmut Bester and Karl Wärneryd

No 264, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: We consider Bayesian incentive compatible and individually rational mechanisms for resolving conflicts between two agents who are uncertain about each other's fighting potential. We model the default option of outright conflict as a probabilistic contest. Examples of such contests may be international conflict, litigation, and elections. We show, in particular, that if the loss of surplus from outright conflict is small enough, then any mechanism must assign a positive probability of conflict. This happens even though only a peaceful agreement avoids a loss of resources.

Keywords: Conflict; asymmetric information; mechanism design; contests. (search for similar items in EconPapers)
JEL-codes: C78 D72 D74 D82 H21 H23 (search for similar items in EconPapers)
Pages: 26 pages
Date: 1998-09-30
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Citations: View citations in EconPapers (6)

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