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Intimidation: Linking Negotiation and Conflict

45 Pages Posted: 21 Apr 2015 Last revised: 15 Feb 2017

Sambuddha Ghosh

Boston University - Department of Economics

Gabriele Gratton

UNSW Australia Business School, School of Economics

Caixia Shen

Shanghai University of Finance and Economics - School of International Business Administration

Date Written: February 14, 2017

Abstract

A challenger wants a resource initially held by a defender, who can negotiate a settlement by offering to share the resource; if this fails, conflict ensues. We propose a dynamic non-cooperative game in which negotiation and conflict influence each other. During conflict each player could be a tough type for whom fighting is costless; therefore non-concession intimidates the opponent into conceding. We derive how the probabilities of being tough, relative discount factors, and the time until conflict all determine the likelihood of conflict and its length. Several policy relevant lessons emerge. An offer made by a defender unaware of his own type fails with some probability if the threat of conflict is imminent, but succeeds for sure if the threat of conflict is distant and the defender is more patient than the challenger. Instead, if the offer is made by a privately informed and more patient defender, negotiation fails completely. Finally, allowing multiple offers is no more effective---a serious offer is made only on the brink of conflict. Conflict can be prolonged even if the probability of the tough type is arbitrarily small.

Keywords: Intimidation, reputation, terrorism, negotiation, brinkmanship, costly war-of-attrition

JEL Classification: D74, D82

Suggested Citation

Ghosh, Sambuddha and Gratton, Gabriele and Shen, Caixia, Intimidation: Linking Negotiation and Conflict (February 14, 2017). UNSW Business School Research Paper No. 2015-07A. Available at SSRN: https://ssrn.com/abstract=2593620 or http://dx.doi.org/10.2139/ssrn.2593620

Sambuddha Ghosh

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

Gabriele Gratton (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Caixia Shen

Shanghai University of Finance and Economics - School of International Business Administration ( email )

777 Guo-ding Road
Shanghai, 200433
China

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