Transfers and Alliance Break Up
Economics, Universidad Carlos III de Madrid
Last modified: February 26, 2011
Presentation date: 03/12/2011 2:45 PM in NH 1120, Session A
We analyze the role of resource transfers for peace to hold in equilibrium in a conflict between a single party and an alliance of two parties; motivated by the historical examples of the Crusades and the Balkan Wars. The conflict concerns the resources that belong to the single party. The parties are unconstrained in their resources, the war is destructive, and there is possibility of further conflict within the alliance. The single party may transfer resources to any rival member; however there is an imperfection in the transfer mechanism, possibly explained by geographical and/or ethnic distance between the rivals, or the existence of an intermediate party claiming some part of the transfer, resulting in partially realized transfers by the members. The game is solved for three different cases that vary in the structure of the enforcing mechanism and cooperative behavior of the members of the alliance. In the first case we assume that the transfers sent are binding, and we show that peace holds unless the magnitude of the imperfection is very high. For the rest two cases, we solve the game for non-cooperative and cooperative allies without binding agreements. We show that peace holds with a small amount of transfer (relative to the resource under attack) if the level of the imperfection is low and the single party could redeem at least a small part of the transfers sent, if she wins. The transfer required for peace is larger if the allies are cooperative.