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Conflict and Change

Theory A. A Model There are two groups. Members of one group can attack those of the other, possibly by exploiting a past confrontation or violent incident with economic theory of conflict 725 This content downloaded from on Tue, 9 Sep 2014 10:18:07 AM All use subject to JSTOR Terms and Conditions a possible religious interpretation. The individuals involved—in their role as aggressors—decide whether or not to take matters further by “communalizing” the incident.8 At the same time, members of either group—in their role as potential victims—seek security against the possibility of such attacks. Formally, nature moves first and generates aggressor-victim pairs belonging to two different religious groups. Each aggressor observes the victim’s income or wealth. The victim does not observe aggressor income; this captures the idea that a potential victim makes decisions about protection before an attack occurs. One way to interpret our empirical findings is that it throws some light on the probability that nature chooses aggressors from one group rather than from the other. In short, both groups will have aggressors and victims; the question is one of the relative proportions of each. A potential victim is characterized by his income or wealth, which we denote by y. Let a be the perceived probability of this person being attacked. A victim can seek protection against attack; think of this as “defense” d. While not directly affecting a itself ðthough in equilibrium a will be endogenousÞ, an individual’s investment in defense lowers the probability that the attack will be effective. Write this probability as p 5 pðdÞ, with p continuous and decreasing in d. While we regard d somewhat abstractly here, it has several interpretations to which we return below. For now, we simply view a potential victim with income y as picking d to maximize