COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. xx Mediation and Peace Johannes Hörner, Massimo Morelli and Francesco Squintani August 2010 This paper brings mechanism design to the study of conflict resolution
in international relations. We determine when and how unmediated communication and
mediation reduce the ex ante probability of conflict, in a simple game where conflict is
due to asymmetric information. Unmediated communication helps reducing the chance of
conflict as it allows conflicting parties to reveal their types and establish
type-dependent transfers to avoid conflict. Mediation improves upon unmediated
communication when the intensity of conflict is high, or when asymmetric information is
large. The mediator improves upon unmediated communication by not precisely reporting
information to conflicting parties, and precisely, by not revealing to a player with
probability one that the opponent is weak. Surprisingly, in our set up, arbitrators who
can enforce settlements are no more effective in reducing the probability of conflict than
mediators who can only make non-binding recommendations. |
