Conflict

economics Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and intera ...

is a branch of economics that puts the allocation of resources by means of violent fighting, i.e. conflict, into

economic models In economics, a model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified, often mathematical, framework desig ...

. In traditional economics, appropriation is a non-violent process that is guaranteed by perfect property rights and their costless enforcement. Conflict economics sheds a different light on appropriation. It is set in a model of contest between two players. Conflict economics introduces the idea that agents have to decide between production of

resources Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our needs and wants. Resources can broadly be classified upon their a ...

and production of guns, i.e. tools that have the sole purposes of appropriating the resources produced by the other player. Different models are introduced to illustrate various situations that have similarities to real life conflicts.

Resource conflict model

Two parties contest a given resource Z. The player who wins the contest claims the entire resource, not leaving anything for the losing party. The

probabilities Probability is the branch of mathematics concerning numerical descriptions of how likely an event is to occur, or how likely it is that a proposition is true. The probability of an event is a number between 0 and 1, where, roughly speaking, ...

of winning are determined by each party’s choice of guns.

Guns vs. butter model

In this model, agents face a

trade-off A trade-off (or tradeoff) is a situational decision that involves diminishing or losing one quality, quantity, or property of a set or design in return for gains in other aspects. In simple terms, a tradeoff is where one thing increases, and anot ...

between producing themselves and grabbing the

output Output may refer to: * The information produced by a computer, see Input/output * An output state of a system, see state (computer science) * Output (economics), the amount of goods and services produced ** Gross output in economics, the value of ...

of the other agent. Each party is endowed with a secure resource R. The resource cannot be consumed directly but has to be allocated between producing guns (tools for conflict) or butter (consumption). Again, the probability of winning the contest and grabbing the other output depend on the relative numbers of guns produced. This model allows testing of different

power structure In political sociology, but also operative within the rest of the animal, animal kingdom, a power structure is a hierarchy of competence or aggression (might) predicated on power (social and political), influence between an individual and other ...

s between the players. One of the interesting outcomes is that if one agent has higher

productivity Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proces ...

, i.e. if he uses one unit of the resource he will gain more butter than his opponent would, he will receive a relatively lower expected pay-off. This is due to the fact that each player will then exploit his or her

comparative advantage In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comp ...

, with the more productive player producing more butter and the less productive player producing more guns, resulting in a higher chance of winning the conflict thus leading to a higher expected pay-off.

Settlement in the shadow of conflict

Conflict is not the only way that parties can appropriate resources. Depending on the risk preferences of the agents, a simple division of the contested resource according to a settlement can be envisioned. A two-stage

game A game is a structured form of play (activity), play, usually undertaken for enjoyment, entertainment or fun, and sometimes used as an educational tool. Many games are also considered to be work (such as professional players of spectator s ...

serves to illustrate this. In the first stage, parties make their gun choices. In the second stage, negotiations take place. If the negotiations are successful, the players agree on a division and share the good. If the negotiations are not successful, conflict ensues with the winning party again taking the whole resource. This two-stage model is especially interesting if one includes the possibility of destruction into the model, i.e. in case of conflict the winner is left with only a part of the contested resource. Parties might prefer settlement over conflict if they have an aversion to uncertainty (outcome of conflict dependent on probabilities) or destruction. However, in the long term conflict might be the dominant strategy. Introducing a discount rate for payoffs in the future might induce players to start conflict in the present. Defeating your opponent in the present will secure the resource for you in the future (opponent is eliminated), thus not having to share it in a settlement.

Conflict, alliances and group structures

Conflict might not occur between two agents only, but a number of agents can be involved in hostilities. Individuals and parties have been repeatedly proven to form alliances to achieve a common goal. There are cost advantages to be realized or the sum of individual efforts creates

synergies Synergy is an interaction or cooperation giving rise to a whole that is greater than the simple sum of its parts. The term ''synergy'' comes from the Attic Greek word συνεργία ' from ', , meaning "working together". History In Christian ...

that cannot be realized by individuals on their own. However one has to keep in mind that if individuals work together there are always

incentive In general, incentives are anything that persuade a person to alter their behaviour. It is emphasised that incentives matter by the basic law of economists and the laws of behaviour, which state that higher incentives amount to greater levels of ...

s for "free riding." In conflict economics, group conflict builds upon the resource conflict model. A two-stage game is constructed. In the first stage (inter-group conflict) groups and individuals compete for the resource. The probabilities of winning depend on the effort, i.e. number of guns, that individuals are contributing to the group. In the second stage (intra-group conflict) the successful group allocates the won resource among its members. This allocation can be according to the efforts that individuals spent, contracts or just an equal distribution according to the number of members. However group structures have been found to be more unstable the higher the number of individuals there are in the group. Individuals have higher expected payoff by switching to a group with less individuals or forming a stand-alone alliance. For alliances to be stable they have to be roughly the same sizes or

symmetric Symmetry (from grc, συμμετρία "agreement in dimensions, due proportion, arrangement") in everyday language refers to a sense of harmonious and beautiful proportion and balance. In mathematics, "symmetry" has a more precise definiti ...

Resource conflict model

Guns vs. butter model

Settlement in the shadow of conflict

Conflict, alliances and group structures

See also

References

Further reading