Kimbrough, Erik and Sheremeta, Roman (2013): Side-Payments and the Costs of Conflict. Published in: International Journal of Industrial Organization No. 31 (2013): pp. 278-286.
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Abstract
Conflict and competition often impose costs on both winners and losers, and conflicting parties may prefer to resolve the 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.
Item Type: | MPRA Paper |
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Original Title: | Side-Payments and the Costs of Conflict |
Language: | English |
Keywords: | contests, conflict resolution, side-payments, experiments |
Subjects: | C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior |
Item ID: | 46808 |
Depositing User: | Roman Sheremeta |
Date Deposited: | 07 May 2013 20:46 |
Last Modified: | 27 Sep 2019 22:51 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/46808 |