Alliances in Defense against an Opportunistic Opponent: Theory and Experiments

32 Pages Posted: 14 Aug 2012

See all articles by Cary A. Deck

Cary A. Deck

University of Alabama - Department of Economics, Finance and Legal Studies

Joshua Foster

University of Wisconsin - Oshkosh

Hongwei Song

Bellarmine University

Date Written: August 13, 2012

Abstract

This paper considers a situation in which an attacker can select among two possible targets for a single concentrated attack after observing the level of defense at each. Despite the attacker’s chance of success being determined by a proportional contest success function, if each target is defended separately the attacker should attack the weakest target creating an all-pay auction arms race between defenders that largely dissipates the value of the defended resources. However, if the defenders form a protective alliance then their expected payoffs increase despite the fact that a successful attack is theoretically more likely given the overall reduction in defense. Controlled laboratory experiments designed to test the model’s predictions are also reported. Behaviorally, alliances yield more profit to defenders as predicted, but also reduce the likelihood of a successful attack counter to the theoretical prediction.

Keywords: Contests, All-Pay Auctions, Alliances, Conflict Resolution, Terrorism, Arms Race, Experiments

JEL Classification: C72, C91, D72, D74

Suggested Citation

Deck, Cary A. and Foster, Joshua and Song, Hongwei, Alliances in Defense against an Opportunistic Opponent: Theory and Experiments (August 13, 2012). Available at SSRN: https://ssrn.com/abstract=2128916 or http://dx.doi.org/10.2139/ssrn.2128916

Cary A. Deck (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

Joshua Foster

University of Wisconsin - Oshkosh ( email )

800 Algoma Blvd.
Oshkosh, WI 54901
United States

Hongwei Song

Bellarmine University ( email )

United States

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