CeDEx 2021-04: How Alliances Form and Conflict Ensues

Summary

In a social network in which friendly and rival bilateral links can be formed, how do alliances between decision-makers form, and what determines whether a conflict will arise? We study a network formation game between ex-ante symmetric players in the laboratory to examine the dynamics of alliance formation and conflict evolution. A peaceful equilibrium yields the greatest social welfare, while a successful bullying attack transfers the victimized player’s resources evenly to the attackers at a cost. Consistently with the theoretical model predictions, peaceful and bullying outcomes are prevalent among the randomly re-matched experimental groups, based on the cost of attack. We further examine the dynamics leading to the final network and find that groups tend to coordinate quickly on a first target for attack, while the first attacker entails a non-negligible risk of successful counter-attack by initiating the coordination. These findings provide insights for understanding social dynamics in group coordination.

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Authors

Lu Dong, Lingbo Huang, Jaimie W Lien and Jie Zheng

 

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