Conflict and Uncertainty: A Dynamic Approach

the past exogenous technological shock. Agents know the functional forms involved in the game,
but are unaware of the value of random parameters and shocks.

Therefore our complete game can be represented in an extensive way as: (α, θ, g, u, e, x, μ, I, T).

4 Dynamic mechanism

The key feature of our model is the evolution with time of the valuation of the resource. We do not
believe that in a repeated game the valuation for the good should be kept static. Assume that there
is some kind of satiation from the conflict good. For example, the public opinion may get tired of
their current politicians, and this generates a cost in terms of “happiness” to the incumbent agent; a
militarv victorv after manv defeats is more valued than the last of manv consecutive victories; the
novelty is more valued etc. This all lead us to think that the valuations change according to the
success in obtaining the good.

However the adjustments are not immediate. It takes time to change the subjective perceptions:
if the agent is a political party, the valuation of the good in dispute comes from an agreement
process; the subjective beliefs and valuations do not change from one event to another. This is why
we assume the valuation as fixed within each time period. Then, the time frame is defined by the
moments when the valuations can be changed.

Each time period the valuation of the good is updated according to a fully deterministic rule

vi+1 = vⁱ (⅛ st)

where s∖ is a success measure for the agent i ∈ I in the period t ∈ T. In this way we link the
valuation evolution to the results obtained in the recent past. The “success index” is given by a
function which depends on the share of good obtained

^st = s (pŋ

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