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Economic Theory

, Volume 32, Issue 2, pp 333–352 | Cite as

Simultaneous inter- and intra-group conflicts

  • Johannes Münster
Research Article

Abstract

This paper models the trade-off between production and appropriation in the presence of simultaneous inter- and intra-group conflicts. The model exhibits a ‘group cohesion effect’: if the contest between the groups becomes more decisive, the players devote fewer resources to the intra-group conflict. Moreover, there is also a ‘reversed group cohesion effect’: if the intra-group contests become less decisive, the players devote more resources to the inter-group contest. The model also sheds new light on normative questions. I derive exact conditions for when dividing individuals into more groups leads to more productive and less appropriative activities. Moreover, I show that there is an optimal size of the organization which is determined by a trade-off between increasing returns to scale in production and increasing costs of appropriative activities.

Keywords

Conflict Rent-seeking Federalism Hierarchy 

JEL Classification Numbers

D72 D74 H11 H74 

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Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  1. 1.Free University of Berlin and WZBBerlinGermany

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