Abstract
We study whether the Coase conjecture holds in a model of bargaining during conflict due to Powell [18] and Fearon [7]. Two players, A and B, contest a divisible resource. At any time during the conflict, they can make a binding agreement to share the resource. The conflict continues until they make an agreement or one side collapses. Player B privately knows whether he is a strong or a weak type, with a greater probability of collapse if he is weak. The "lemons condition" says that player A would rather fight to the end than make a generous offer at the beginning of the conflict that both types of player B would accept. If this condition holds then the expected length of the conflict is bounded away from zero, even if negotiations are frictionless. Thus, the Coase conjecture does not hold. We study how the minimum length of conflict depends on the parameters, and the impact of third party intervention.
The seminar will be held in room 1249 (12th floor) at Eilert Sundts Hus. The address is Moltke Moes vei 31.