Escalation in conflict games: on beliefs and selection
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Escalation in conflict games: on beliefs and selection Kai A. Konrad1 · Florian Morath2 Received: 8 January 2019 / Revised: 18 August 2019 / Accepted: 21 October 2019 © The Author(s) 2019
Abstract We study learning and selection and their implications for possible effort escalation in a simple game of dynamic property rights conflict: a multi-stage contest with random resolve. Accounting for the empirically well-documented heterogeneity of behavioral motives of players in such games turns the interaction into a dynamic game of incomplete information. In contrast to the standard benchmark with complete information, the perfect Bayesian equilibrium features social projection and type-dependent escalation of efforts caused by learning. A corresponding experimental setup provides evidence for type heterogeneity, for belief formation and updating, for self-selection and for escalation of efforts in later stages. Keywords Dynamic conflict · Lottery contest · Heterogeneity · Incomplete information · Uncertainty · Escalation · Beliefs · Selection · Learning · Social projection · Experiment JEL Classification C90 · D72 · D74 · D83
A preliminary version of this paper circulated with a slightly different title, “Escalation in dynamic conflict: On beliefs and selection” Ẇe benefited from comments at conferences, workshops and seminars at Beijing, Berlin, Chapman, Cornell, EPCS Rome, Frankfurt, Maastricht, Munich, Norwich, Rotterdam, Vanderbilt, Vienna, and York. The usual caveat applies. Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1068 3-019-09630-1) contains supplementary material, which is available to authorized users. * Florian Morath [email protected] Kai A. Konrad [email protected] 1
Max Planck Institute for Tax Law and Public Finance, Marstallplatz 1, 80539 Munich, Germany
2
University of Innsbruck, Universitaetsstr. 15, 6020 Innsbruck, Austria
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K. A. Konrad, F. Morath
1 Introduction Substantial research has been devoted to the study of conflict, described as an adversarial interaction between players who expend efforts and try to achieve mutually exclusive goals.1 We study dynamic properties of such conflict if the contestants take part in a sequence of pairwise contests, have incomplete information about their opponent’s type and learn from the interactions about the composition of the population of potential future opponents. Extensive experimental work on conflict confronts theory predictions with subjects’ behavior in the laboratory and has uncovered systematic behavioral departures from the complete information benchmark models. One main interpretation of the findings is that the individuals who interact in conflict games—in the laboratory and elsewhere—follow motives beyond the maximization of monetary payoffs and that these motives are not uniform across individuals. Whereas monetary incentives are typically common knowledge in experimental setups, these other (intrinsic) motivations are not; this turns the in
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