Conflict and Uncertainty: A Dynamic Approach

CEDE

Centro de Estudios
sobre Desarrollo Economico

Conflict and uncertainty: A Dynamic Approach*

Miguel A.Espinosa F.^t Juan D. Prada S∙^,

Most of the conflict theory papers have used a one-shot game set-up. This does not
correspond to reality and is certainly incapable of modeling real conflict situations. We
propose a dynamic model with N-agents in an infinite time frame which allow us to
adequately analyze conflicts. The dynamic aspects of the conflict come at least from
two sources: first, the preferences on the good in dispute are not static; second, agents
in conflict can influence the future of the conflict by making investment in conflict’s
technology. We use a simple deterministic rule that defines the evolution of the subjective
valuation for the good in dispute according to the results obtained by the agents in the
recent past. During each period the realization of stochastic variables of the nature’s
states induces uncertainty in the game. The model is a theoretical approach that can
be applied to evaluate the role of uncertainty and valuations’ evolution on the optimal
choices of forward-looking economic agents that seek to appropriate a share of a divisible
resource.

Keywords: Conflict Theory, Dynamic Economic Model, Uncertainty.

JELClassification: C70, D70, D81, D84.

*This paper was presented in the National Symposium of Microeconomics in Bogota, Colombia in August 2007. The
remaining errors are ours. The views expressed in the paper are those of the authors and do not represent those
of the Banco de la Republica or its Board of Directors.

Wniversidad de Ios Andes, e-mail: migu-espQuniandes.edu.co

⅛anco de la Republica. e-mail JpradasaQbanrep.gov.co

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