Bargaining and Conflict: The Impact of Unobservable Preparation

44 Pages Posted: 17 Oct 2001

See all articles by Abraham L. Wickelgren

Abraham L. Wickelgren

University of Texas at Austin - School of Law; University of Texas at Austin - Center for Law, Business, and Economics

Abstract

Most analyses of bargaining focus on the effect of exogenous asymmetric information about the gains from trade. This paper shows that, even with ex ante identical players, the ability to make unobservable preparations affecting the outcome of a conflict generates asymmetric information. This makes the possibility of conflict inevitable, even when it is common knowledge that conflict reduces total welfare and players can bargain to reach a settlement. I characterize the possible equilibria of this infinite-horizon, alternating-offer, bargaining game with two-sided uncertainty and outside options. Finally, I derive comparative statics for the probability of conflict and total welfare.

Keywords: Bargaining, Conflict, Unobservable Preparation

JEL Classification: D00, D74

Suggested Citation

Wickelgren, Abraham L., Bargaining and Conflict: The Impact of Unobservable Preparation. Available at SSRN: https://ssrn.com/abstract=287053 or http://dx.doi.org/10.2139/ssrn.287053

Abraham L. Wickelgren (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

University of Texas at Austin - Center for Law, Business, and Economics

Austin, TX 78712
United States

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