Conflict as a Part of the Bargaining Process

Abstract

This article investigates the use of conflict as a bargaining instrument. First, it illustrates the role of confrontation as a source of information by analysing a sample of colonial and imperial wars. Then, it explores a bargaining model with incomplete information where parties can choose the scope of the confrontation they may want to engage in. This model shows that conflict can have a double-edged effect: it may open the door to agreement when no agreement is feasible. But it can also create inefficiency when agreement is possible but the agents fight in order to improve their bargaining position. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

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