Munich Personal RePEc Archive
Reciprocity in the shadow of Threat
Caruso, Raul
Istituto di Politica economica, Università Cattolica di Milano
February 2007
Online at https://mpra.ub.uni-muenchen.de/1804/
MPRA Paper No. 1804, posted 16 Feb 2007 UTC
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Re cip ro city in th e Sh ad o w o f Th re at
by
Raul Caru s o
In s titu te o f Eco n o m ic Po licy
Un ive rs ità Catto lica d e l Sacro Cu o re d i Milan o
raul.caru s o @u n icatt.it
Pape r pre pare d fo r th e Co n fe re n ce ‘Re cip ro city, Th e o rie s an d
Facts ’, Fe bru ary 2 2 -2 4 , 2 0 0 7, Ve rban ia.
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Re cip ro city in th e Sh ado w o f Th re at
Raul Caru s o
*
Abs tract
This paper considers a partial equilibrium m odel of conflict w here tw o
asym m etric, rational and risk-neutral opponents evaluate differently a
contested stake. Differently from com m on contest m odels, agents have the
option of choosing a second instrum ent to affect the outcom e of the
conflict. The second instrum ent is assum ed to capture positive investm ents
in ‘conflict m anagem ent’ - labelled as ‘talks’. It w ill be dem onstrated that
the asym m etry in the evaluation of the stake does constitute a pow erful
force influencing agents’ behaviour. In particular, (a) w henever the
asym m etry in the evaluation of the stake is extrem ely large there is no
room for cooperation and a conflict trap em erges; (b) w henever the
degree of asym m etry falls w ithin a critical interval cooperation seem s to
em erge even if only the agent w ith the higher evaluation of the stake
m akes a concession, proportional to the optim al 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 w ay for
cooperation. In such a case, the existence of reciprocal concessions paves
the w ay for establishing a potential settlem ent region (PSR) given that
both parties can be better off w hile expending resources in ‘talks’. Finally,
throughout the paper, the concept of entropy is applied as a tool for the
m easurem ent and evaluation of conflict and conflict m anagem ent.
KEYWORDS: Conflict, Contest, Conflict management, conflict resolution,
concessions, reciprocity, asymmetry in evaluation, Statistical entropy,
cooperation, integrative systems, ‘guns’ and ‘talks’.
JEL CLASSIFICATION : D7, D 74 .
*
Istituto di Politica Economica, Università Cattolica del Sacro Cuore, e-mail
raul.caruso@unicatt.it, Paper prepared for the conference, Reciprocity, Theories
and Facts, February 22-24, Milano. I warmly thank Luigi Campiglio, Vito
Moramarco, Maurizio Motolese, Carsten K. Nielsen, Johan Moyersoen, Nicola
Giocoli and Davide Tondani.
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RECIPROCITY IN TH E SH AD OW OF TH REAT
Raul Caru s o
IN TROD UCTION
The basic question of this work is whether a particular form of stro n g
re cip ro city can favour the establishing of conflict management procedures
between rational agents involved in a destructive conflict. In particular, this
is the story of two rational agents clashing over the redistribution of a
divisible stake. Due to the absence of norms and institutions governing and
enforcing the redistribution of the stake they compete by means of positive
investments in arms and violent efforts.
In order to better analyse the emergence of conflict management
some assumptions about the conflict situation are needed. Then,
throughout the paper a conflict interaction is assumed to be: a destructive
interaction w hich involves strategic interdependent decisions in the
presence of coercion and anarchy. This concept of conflict relies to a large
extent upon three main interdependent features: (i) coercion; (ii) anarchy;
(iii) wastage of resources.
The first fundamental feature of conflict is the presence of coercion.
By coercion, I intend that kind of behaviour that is shaped and influenced
by the existence of a credible threat. A credible threat depends upon the
potential exploitation of brutal force. Albeit with different approaches, the
importance of threat has been brilliantly expounded by John Nash (1953),
Thomas Schelling (1960/1966), Kenneth Boulding (1963) and John
Harsanyi (1965). The existence of a threat sheds light on the characteristic
feature of conflict – namely, that while involved in a conflict the choices of
an agent are choices made under coercion. Even though agents have options
to make a choice, this is not purely voluntary. Take extortion. In economic
terms, it is nothing but a monetary transfer flowing from an individual to
another. A shopkeeper under the credible threat of a racketeer has a choice.
(S)He could not acquiesce to the extortion. Whatever the outcome of this
interaction it would have been a choice under coercion.
The second characteristic feature of conflict is anarchy. By ‘anarchy’ I
simply mean nothing but the absence of rules, norms and institutions
governing agents’ behaviour. As noted above, it is a state-of-nature
environment where allocations of resources are determined also through
the exploitation of brutal force. Albeit appearing to be a worst case scenario,
this does not imply that a conflict cannot be managed or solved. It can be
managed and solved only in the presence of endogenous ‘rules-of-the-game’
governing the interaction. There is no hierarchical way of mediation and
conciliation as that provided by states or – broadly speaking – by organised
communities.
The third key feature is that conflict is costly and wasteful. Positive
expenditures in conflict are irreversible sunk costs. In particular, conflict
efforts are interpreted as unproductive activities leading to inefficiencies in
economic life. This is in the spirit of the definition provided by Bhagwati
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(1982), who proposes a general taxonomy for a broader range of economic
activities representing ways of making profit in spite of being directly
unproductive, conflicts, contests and rent-seeking can be considered
directly unproductive activities (DUP). According to this view, such
activities yield pecuniary returns but do not produce goods and services
which enter a utility function, either directly or indirectly through increased
production or availability to the economy of goods that enter a utility
function.
However, conflicts are rarely a simple exploitation of brutal force.
Most conflicts involve remarkable bargaining and communication efforts
between the antagonists. Beyond violence, as applied when sending actual
or potential threats, agents apply other instruments to successfully end any
struggle. During a war, for example, the exploitation of actual violence is
often interlinked with diplomatic efforts. Diplomatic negotiations are often
conducted while troops are deployed on the battlefield. In international
interactions, the exploitation of potential or actual violence cannot be
disentangled from partial openings and cooperative behaviours. In general
they could be labelled broadly as ‘conflict management efforts’. What is the
nature of such conflict management efforts? By conflict management can be
indicated the entire set of joint actions available to the opponents in order
to be better off whilst reducing the intensity of conflict. Moreover, what
agents pursue while managing the conflict is also the establishing of a
certain ‘rules-of-the-game’ governing the conflict interaction. Given the
non-cooperative environment it must be a self-enforcing joint strategy that
make parties better off allowing for the emerging of institutions. In a
broader view, ‘conflict management efforts’ can involve a wide spectrum of
activities. For expository convenience, consider among others: (i)
bargaining; (ii) communication and strategic information transmission; (iii)
costly signalling. Alike efforts exerted in offending and hindering other
agents’ behaviour, efforts exerted to manage or solve the conflict fall within
the broader category of unproductive activities. This is not a novelty. Pigou
(1921/1929) already enlisted ‘bargaining’ amongst the sources of
inefficiency in public and private sectors of the economy. Using his words
“[…]Of bargaining proper there is little that need be said. It is obvious that
intelligence and resources devoted to this purpose, w hether on one side of
on the other, and w hether successful or unsuccessful yield no net product
to the com m unity as a w hole. […] these activities are w asted. They
contribute to private, but not to social, net product […]”
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In Caruso (2006a) and Caruso (2007) I borrowed the labelling of the
‘Bad Cop and the Good Cop Game’ in order to give a simple and appealing
depiction of this idea. This paper does constitute an extension of these
foregoing works. In particular, this paper aims to study the emergence of a
conflict management scenario grounded upon strong reciprocity . Here I
would recall a definition of strong reciprocity as presented by Gintis (2000).
Borrowing his words: […]H o m o R e cip r o ca n s exhibits w hat m ay be
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Pigou (1929) p. 202-203.
