Abstract
We present a study of conflict from an economic perspective. We start by reviewing the approach to conflict in the economic sciences. We model conflict as a process of allocation of resources into two main technologies, production and appropriation. Then we complement this framework by allowing participants to negotiate. We introduce models of bargaining with complete and incomplete information. We incorporate the cost of conflict and this ensures that negotiated settlements always produce a more efficient outcome. The possibility of conflict arises as a result of incomplete information, which takes the form of informational asymmetry about the cost of conflict. We find endogenous war equilibrium outcomes and compare the outcome of optimal resource equilibria with arbitrary non-equilibria allocations. We also present some empirical evidence in the literature supporting the choice of utility models of conflict and present new results showing support for our propositions.