Resolving Conflicts by a Random Device

Abstract

Due to the high costs of conflict both in theory and practice, we examine and experimentally test the conditions under which conflict can be resolved via a random device. We model conflict as a two-agent rent-seeking contest for an indivisible prize. Before conflict arises, both agents may agree to allocate the prize by coin flip to avoid the costs of conflict. In equilibrium, risk-neutral agents with relatively symmetric conflict capabilities agree to resolve the conflict by randomization. However, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. The results of the experiment confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.

Keywords: contest, conflict resolution, experiments

JEL Classification: C72, C91, D72, D74