3.2 Dissipation
Following Esteban and Ray (1999) we understand conflict as “a situation in which, in the absence
of a collective decision rule, social groups with opposed interests incur losses in order to increase
the likelihood of obtaining their preferred outcome”. We define the dissipation of the conflict as the
sum of those losses, and this measure could be seen as a measure of the intensity of the conflict.
Hirshleifer (1991) notices that generally the cost associated to a conflict includes diverse aspects
as attrition of the resources, collateral damages and foregone opportunities etc. Unfortunately our
approximation to the cost of conflict, like an intensity measurement, leaves aside these considerations.
Nevertheless we believe that these subjects are of fundamental importance, reason why they will be
taken implicitly into account in some of the later analyses. The way to include this in our model is
from the viewpoint of the opportunity cost. Resources devoted to the conflict (effort levels, its cost
and the investment on the technology of the conflict) are resources that are not used in a productive
way, in this context clt, the resource for free use. In the literature which relates conflict theory and
growth analysis, these resources are means to increase the wealth of a group. In our context, the
cost of conflict comes in the form of foregone consumption.
We define the dissipation of the conflict as
dt = Xg (et; $)
i∈I
and this is our measure of the intensity of conflict.
3.3 Uncertainty
We model uncertainty in each period. The total amount of the divisible resource Rt is unknown
during the choice-making process for all the agents. This reflects the fact that the agents are not
capable of determining the total amount of the valuable resource available in each event: in a political
process the exact amount of resources that some party is able to capture is not known until all the
bureaucratic processes are completed; in a struggle for a natural resource, the amount of the resource
(a oil well, a mine etc.) is not known until long after the exploitation begins; in a treasury auction,
the total supply may be unknown for the bidders; in a war, the “booty” that can be appropriated
in an event is known only when the battle is finished. Although the agents involved in a war could
know how big the territory they can win is, the do not know how rich the loots could be. There is
uncertainty about the investment as well. We assume that the exogenous factor zt follows a dynamic