Continuing Conflict

A relatively small but growing literature in economics examines conflictive activities where agents allocate their resource endowments between wealth production and appropriation. To date, their studies have employed a one period, static game theoretic framework. We propose a methodology to extend this literature to a dynamic setting, modeling continuous conflict over renewable natural resources between two rival groups. Investigating the system’s steady states and dynamics, we find two results of general interest. First, Hirshleifer’s “paradox of power” is self-correcting. Second, if productive activities cause damage to disputed resources, the introduction of a small amount of conflictive activity enhances social welfare.