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Introduction to Bargaining

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Introduction to Bargaining PL SC 379R Lecture 1 Conflict as Bargaining Pure conflict is quite rare (Complete extermination/genocide) More often, states in ... – PowerPoint PPT presentation

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Title: Introduction to Bargaining


1
Introduction to Bargaining
  • PL SC 379R
  • Lecture 1

2
Conflict as Bargaining
  • Pure conflict is quite rare (Complete
    extermination/genocide)
  • More often, states in conflict are trying to
    divide some good and cant agree on how the split
    should be made
  • Bargaining is the process by which states come to
    an agreement on how to divide a good and may
    include discussions, threats, displays of force,
    or even war
  • The bargaining process occurs in a state of
    anarchy(?)

3
Some terms
  • Bargaining is always strategic
  • We assume actors are rational and therefore can
    rank preferences over outcomes
  • Actors wish to avoid war because it is ex-post
    inefficient, and therefore will try using
    deterrence , or compellence
  • One way of thinking about these types of
    interactions is game theory

4
Game Theory
  • Game theory is a way of using mathematical logic
    to model interactions between 2 or more players
  • Simplest games are 2x2
  • We will also use extensive form games

5
Prisoners Dilemma
P2
Cooperate Defect
Cooperate
P1
Defect
6
Prisoners Dilemma
P2
Cooperate Defect
Cooperate
P1
Defect
7
Prisoners Dilemma
P2
Cooperate Defect
Cooperate
P1
Defect
8
Prisoners Dilemma
  • No matter what P2 does, P1 is better off
    defecting. No matter what P1 does, P2 is better
    off defecting
  • As long as each player can cheat, defect will
    be the dominant strategy. Therefore cooperation
    seems impossible in this game
  • Bargaining obstacle how do states overcome this
    lack of trust and make agreements?

9
Chicken
P2
Cooperate Defect
Cooperate
P1
Defect
10
Chicken
P2
Cooperate Defect
Cooperate
P1
Defect
11
Chicken
  • The game of chicken has no dominant strategy
  • If P2 defects, P1 would rather cooperate. If P2
    cooperates, P1 would rather defect
  • Bargaining obstacle If P1 wants to win, she
    must convince P2 that she is going to defect.
    But P2 will also be trying to convince P1 that he
    will defect

12
PD Extensive Form
(5,5) (0,8) (8,0) (1,1)
C
P2
C
D
P1
C
D
P2
D
13
Backwards Induction
(5,5) (0,8) (8,0) (1,1)
C
P2
C
D
P1
C
D
P2
D
14
Backwards Induction
(5,5) (0,8) (8,0) (1,1)
C
P2
C
D
P1
C
D
P2
D
15
Some important points
  • Because actors are strategic, they do not always
    try to obtain their most preferred outcome.
    Rather, they try to obtain the most preferred
    outcome they believe is possible
  • In order for a conflict to be resolved peacefully
    two things must occur
  • A settlement must be found that all actors prefer
    to fighting
  • A way must be found to make the agreements
    self-enforcing

16
War is ex-post inefficient
  • States would always be better off avoiding war
    because fighting entails costs
  • If states knew ahead of time what settlement
    would be reached at the end of a war, both would
    be better off simply making this agreement
    without fighting
  • There should always be a settlement that both
    sides prefer to war

17
Expected Utility
  • Before we can understand why there is always a
    settlement preferable to war we need a tiny
    little bit of math.
  • Expected Utility
  • p(win)u(win) p(loss)u(loss)
  • So lets say two people are sharing a pie 50/50.
    One of the pie-eaters is thinking about starting
    a fight to get the rest of the pie. If he wins
    he gets the whole pie (if he gets beat up he gets
    nothing), and he estimates he has about a 60
    chance of winning
  • .601 .400 .60
  • Will he fight?
  • Yes, unless there are some costs involved (bloody
    knuckles, loss of a friend, etc.)

18
Bargaining Space (Fearon)
19
Bargaining Space
  • Any agreement that both sides prefer to war is
    referred to as bargaining space. Because costs
    are involved with fighting, there should be
    bargaining space in ALL situations
  • So why do states ever fight????

20
Why states fight
  • Issue indivisibility. Splitting up a pie is
    easy, but what if we were bargaining over an
    ipod? What types of all or nothing examples
    exist between states?
  • Private Information. Actors have incentives to
    lie about a variety of things. Genuine
    disagreements (apart from lies) may also exist
  • Impossible to commit not to fight in the future.
    A state may choose to fight now because it fears
    having to fight later

21
Bluffing
  • If states hope to deter other states by using
    threats, the ultimate goal is to not have to
    carry the threat out. Therefore
  • Leaders have incentives to bluff
  • If P1 makes a threat, P2 must decide whether P1
    will carry out the threat, or whether he will
    back down. What P2 does depends on what he
    believes P1s type to be
  • Game tree

22
Audience Costs
  • A player may signal his intentions by invoking
    costly signals
  • If a (democratic) leader makes a public threat
    and then backs down, how does he appear to his
    (voting) public? What is likely to happen to
    such a leader?
  • Audience Costs
  • How else might states lock themselves into
    carrying out a certain action (chicken)?

23
Honest Disagreements
  • Each state may honestly believe that it is the
    stronger state and would win an eventual war
    (WWI)
  • States may disagree about what is more important
    to victory (offensive power vs. defensive power)
  • States may have different expectations about what
    will achieve victory (killing lots of the enemy
    vs. dragging the fight out into a long and costly
    process)

24
Bargaining Reputation
  • How a player acted in the past may indicate how
    she is likely to act in the future
  • Outside observers When P1 and P2 are bargaining,
    one or both may be concerned about how P3 will
    interpret events
  • Future bargaining P1 may be concerned with the
    way P2 interprets events because they will inform
    future bargaining situations

25
Future conflicts
  • Leaders may decide a conflict over some issue is
    inevitable, and may decide that in the future
    their relative capabilities will decline. They
    may therefore choose to fight now rather than
    fight (or make large concessions later)
  • How can states lock themselves into a course of
    non-violence in the future (prisoners dilemma)?
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