SSE/EFI Working Paper Series in Economics and Finance
No 264:
Conflict Resolution Under Asymmetric Information
Helmut Bester and Karl Wärneryd ()
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.; (follow links to similar papers)
JEL-Codes: C78; D72; D74; D82; H21; H23; (follow links to similar papers)
26 pages, September 30, 1998
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