Contributing to peace

Abstract

Contest theory analyses an anarchic economy where agents use resources in acquisitive conflict as well as for consumption, and explores condition for peace or conflict to prevail in equilibrium. History indicates that peacekeepers in the shape of kings, dictators or states often endogenously arise in such circumstances. I analyse an extended version of the canonical Tullock contest in which each of the potential contestants first has the option of contributing some resources to a neutral peacekeeper, and then allocates her remaining resources between arms and consumption. In the subsequent subgame, if one of the contestants attacks the other, then the peacekeeper joins its resources with the agent that is attacked. I show that, for less unequal resource distributions, contribution to peacekeeping is positive and subsequently leads to peace. The deterrence equilibria are pareto-superior to the corresponding equilibria of the pure Tullock contest except in a narrow range. However, no contributions are made when the endowment distribution is sufficiently unequal, and conflict occurs in equilibrium.