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Rules for Dividing a Disputed Resource in the Context of the Classical Liberal Argument for Peace

Author

Listed:
  • Garfinkel, Michelle

    (University of California-Irvine)

  • Syropoulos, Constantinos

    (Drexel University)

Abstract
In this paper, we study alternative forms of conflict resolution, both peaceful and non-peaceful, between two countries that compete for claims to a resource used to produce potentially traded goods. Consistent with the classical liberal argument, peace supports mutually beneficial trade, whereas war preempts it. War always induces countries to allocate resources into non-contractible arming ("guns") for superiority in conflict. Under peaceful settlement, countries might choose to arm as well for gaining leverage in negotiations, but arming is typically less than what it is under war. Building on the observation that arming itself affects the countries' bargaining sets, we compare the efficiency properties of division rules generated by three prominent bargaining solutions - namely, splitting the surplus, equal sacrifice, and Nash bargaining - and show how they depend on the gains from trade.

Suggested Citation

  • Garfinkel, Michelle & Syropoulos, Constantinos, 2017. "Rules for Dividing a Disputed Resource in the Context of the Classical Liberal Argument for Peace," School of Economics Working Paper Series 2017-13, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2017_013
    as

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    References listed on IDEAS

    as
    1. Michelle R. Garfinkel & Michael McBride & Stergios Skaperdas, 2012. "Governance and Norms as Determinants of Arming," Revue d'économie politique, Dalloz, vol. 122(2), pages 197-212.
    2. McBride, Michael & Skaperdas, Stergios, 2014. "Conflict, settlement, and the shadow of the future," Journal of Economic Behavior & Organization, Elsevier, vol. 105(C), pages 75-89.
    3. Katherine Barbieri, 1996. "Economic Interdependence: A Path to Peace or a Source of Interstate Conflict?," Journal of Peace Research, Peace Research Institute Oslo, vol. 33(1), pages 29-49, February.
    4. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(3), pages 379-414, July.
    5. Solomon William Polachek, 1980. "Conflict and Trade," Journal of Conflict Resolution, Peace Science Society (International), vol. 24(1), pages 55-78, March.
    6. Reuven Glick & Alan M. Taylor, 2010. "Collateral Damage: Trade Disruption and the Economic Impact of War," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 102-127, February.
    7. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    8. Anbarci, Nejat & Skaperdas, Stergios & Syropoulos, Constantinos, 2002. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects," Journal of Economic Theory, Elsevier, vol. 106(1), pages 1-16, September.
    9. Michelle R. Garfinkel & Stergios Skaperdas, 2000. "Conflict without Misperceptions or Incomplete Information," Journal of Conflict Resolution, Peace Science Society (International), vol. 44(6), pages 793-807, December.
    10. Powell, Robert, 2006. "War as a Commitment Problem," International Organization, Cambridge University Press, vol. 60(1), pages 169-203, January.
    11. Garfinkel, M.R. & Skaperdas, S., 2000. "Conflict without Misperceptions or Incomplete Information: how the Future Matters," Papers 99-00-11, California Irvine - School of Social Sciences.
    12. Stergios Skaperdas & Constantinos Syropoulos, 2001. "Guns, Butter, and Openness: On the Relationship between Security and Trade," American Economic Review, American Economic Association, vol. 91(2), pages 353-357, May.
    13. Jack Hirshleifer, 1989. "Conflict and rent-seeking success functions: Ratio vs. difference models of relative success," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 251-262, Springer.
    14. Garfinkel, Michelle R. & Skaperdas, Stergios & Syropoulos, Constantinos, 2015. "Trade and insecure resources," Journal of International Economics, Elsevier, vol. 95(1), pages 98-114.
    15. Michelle R. Garfinkel & Constantinos Syropoulos, 2019. "On Trade and the Stability of (Armed) Peace," Working Papers 181910, University of California-Irvine, Department of Economics.
    16. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
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    Cited by:

    1. Garfinkel, Michelle R. & Syropoulos, Constantinos, 2021. "Self-enforcing peace agreements that preserve the status quo," Games and Economic Behavior, Elsevier, vol. 130(C), pages 148-178.
    2. Garfinkel, Michelle R. & Syropoulos, Constantinos & Yotov, Yoto V., 2020. "Arming in the global economy: The importance of trade with enemies and friends," Journal of International Economics, Elsevier, vol. 123(C).
    3. Michelle R. Garfinkel & Constantinos Syropoulos, 2019. "On Trade and the Stability of (Armed) Peace," Working Papers 181910, University of California-Irvine, Department of Economics.
    4. Michelle R. Garfinkel & Constantinos Syropoulos, 2022. "International Trade and Stable Resolutions of Resource Disputes," CESifo Working Paper Series 10040, CESifo.
    5. Michelle R. Garfinkel & Constantinos Syropoulos, 2019. "Problems of commitment in arming and war: how insecurity and destruction matter," Public Choice, Springer, vol. 178(3), pages 349-369, March.

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    More about this item

    Keywords

    Resource disputes; gains from trade; negotiated settlements; variable threats; endogenous bargaining set;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D30 - Microeconomics - - Distribution - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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