A Very Simple Model of Conflict and Conflict Management with Asymmetric Evaluations and Institutional Constraint

Abstract

This paper considers a partial equilibrium model of conflict where two rational and risk-neutral opponents conflict in order to appropriate a positive fraction of a stake. This paper is intended to extend the literature on conflict dealing with two main points: (1) the incentives to settle peacefully under an institutional constraint; (2) the impact of asymmetry in evaluations of the stake on such willingness to settle. In formal terms, this paper introduces a crucial modification of the Contest Success Function (CSF) which is commonly used as cornerstone of both rent-seeking and contest models. Such a crucial modification of the CSF is intended to capture the impact of an institutional constraint. The results show that (a) both agents prefer to settle if and only if an institutional fee is fixed under a critical value; (b) the critical value of the institutional fee is directly related to the evaluation of the stake each agent does retain; (c) the agents with a higher evaluation of the stake has a higher willingness to settle.

Keywords: Conflict, institution, credit grant

JEL Classification: D74, D50, D78, D72