Reciprocity in the Shadow of Threat

31 Pages Posted: 1 Mar 2007

See all articles by Raul Caruso

Raul Caruso

Catholic University of the Sacred Heart of Milan

Date Written: February 2007

Abstract

This paper considers a partial equilibrium model of conflict where two asymmetric, rational and risk-neutral opponents evaluate differently a contested stake. Differently from common contest models, agents have the option of choosing a second instrument to affect the outcome of the conflict. The second instrument is assumed to capture positive investments in 'conflict management' - labelled as 'talks'. It will be demonstrated that the asymmetry in the evaluation of the stake does constitute a powerful force influencing agents' behaviour. In particular, (a) whenever the asymmetry in the evaluation of the stake is extremely large there is no room for cooperation and a conflict trap emerges; (b) whenever the degree of asymmetry falls within a critical interval cooperation seems to emerge even if only the agent with the higher evaluation of the stake makes a concession, proportional to the optimal choice of 'talks'; (c) as the evaluations of the stake converge only reciprocal concessions (capturing a kind of strong reciprocity) made by both agents can pave the way for cooperation. In such a case, the existence of reciprocal concessions paves the way for establishing a potential settlement region (PSR) given that both parties can be better off while expending resources in 'talks'. Finally, throughout the paper, the concept of entropy is applied as a tool for the measurement and evaluation of conflict and conflict management.

Keywords: conflict, contest, conflict management, conflict resolution, concessions, reciprocity, entropy, guns and talks, cooperation

JEL Classification: D7, D74, D61, D64, H56

Suggested Citation

Caruso, Raul, Reciprocity in the Shadow of Threat (February 2007). Available at SSRN: https://ssrn.com/abstract=966318 or http://dx.doi.org/10.2139/ssrn.966318

Raul Caruso (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

20123 Milano
Italy

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