We consider a simple bargaining model where conflict occurs if the players cannot agree to share a resource peacefully. Each player can decide to challenge the status quo. A challenge is a strategic move: the challenger commits to start a conflict unless the opponent concedes some part of his endowment. Uncertainty about the opponent's cost of making a challenge generates a unique equilibrium. Increasing the cost of conflict makes the players more hawkish, because challenges become more profitable: the opponent will make larger concessions to avoid a conflict. Actions are strategic substitutes if the cost of conflict is large or if there is a small first-mover advantage, and strategic complements if the cost of conflict is small and there is a large first-mover advantage. We also study the incentives to make strategic investments ex ante to influence the cost of conflict or the payoff to resources.
|Original language||English (US)|
|Number of pages||29|
|State||Published - Sep 15 2015|