1 Introduction
There is a relatively small but growing literature in political economics initiated by Hirshleifer
(1991, 1995), Skaperdas (1992) and Grossman and Kim (1995). Their models share four
common features. First, they postulate that conflict arises from the choice of rational and
self-interested agents. Second, a well-defined and enforced property right over, at least, some
goods do not exist. Third, the agents are assumed to be myopic in a way that they maximize
only the current payoff. Fourth, their model is static. This paper conducts the analysis of
conflict by extending their static models to a dynamic one.
Hirshleifer (1995) takes an initial step towards a dynamic approach by recognizing succes-
sive iterations of the one-shot game, and focuses on the convergent point of such iterations
(he calls such a fixed point ‘a steady state’). Nevertheless, Maxwell and Reuveny (2005, p.31)
correctly point out that "However, this approach is not fully dynamic: it does not specify
equations of motion for any variables, time is not a variable in the model, and the condition
for dynamic stability is not derived based on standard dynamic analysis".
In response to such long-term desires, there have been several papers which attempt to con-
struct a dynamic variation of the one-shot conflicting game analyzed by the above-mentioned
authors. Garfinkel (1990) examines a dynamic model in which agents make choices between
productive and fighting activities. She uses a repeated game setting where threats and punish-
ments are available. Existence of cooperative (or disarmament) equilibria can be established
using Folk Theorem arguments. Skaperdas and Syropoulos (1996) discuss a two-period model
of conflict in which time-dependence is introduced by the assumption that second period re-
sources of each agent are increasing in first-period’s payoff. As a result, ‘the shadow of the
future’ may impede the possibilities for cooperation. In other words, competing agents engage
more in appropriation in order to capture a bigger share of today’s pie. The equilibrium so-
lution concept we employ in this paper allows us to identify possible cooperative outcomes as
a result of decentralized decision-making by agents, without having to rely on the Folk The-
orem of repeated games or enforceable commitments. Nevertheless, since the one-shot game
is repeated every period due to the nature of the repeated game, it would be unsatisfactory