Factional Conflict and Territorial Rents

How do market conditions impact factional violence?

From Chicago to Afghanistan to Rio de Janeiro, armed factions compete violently to control territory they can use to extract economic rents. But what are the precise incentives that underlie these conflicts, when can we expect violence to break out, and how can governments counter it when it does? Bueno de Mesquita uses game theory to understand the hard economics at the root of political violence. This paper examines the intuition held by many news reporters and policymakers that more decentralization—in which increasing numbers of factions each control less territory—leads to increased violence. To understand the structure of this market, he creates a model that incorporates both violent conflict over territory and economic competition among the factions that control those territories.

Bueno de Mesquita’s analysis yields three key insights. First, the more gangs there are (each controlling smaller amounts of territory), the less market power each gang has and the less profitable it is to take control of a new piece of territory. That is, the proliferation of gangs produces intense economic competition, so the profits from controlling each territory are lower. Conversely, when fewer gangs control larger amounts of territory, territorial control is more profitable and gangs are willing to invest more in fighting to get control of the next territory.

Second, increased factionalization leads to more frequent—though less intense—fighting over these smaller territories. When there are relatively few gangs, rivals understand that the violent competition for highly valuable new territory will be vigorous. As a consequence, this threat deters some gangs from engaging in conflict in the first place. This deterrence fades when many gangs fight over relatively low-value territories; the small stakes result in relatively low-cost fighting.

Third, gangs experience less fighting in highly concentrated environments because there are fewer zones to protect. As territories grow, safe zones appear that are insulated from attack because they are surrounded entirely by other territories that belong to the same gang.

All of this suggests that the relationship between factionalization and violent conflict is more nuanced than the conventional wisdom. It is not simply the case that more factions always mean more violence. More gangs are expected to result in more frequent, but less intense, conflict. Overall, the model suggests that the relationship between factionalization and expected violence has an inverted-U shape. To know whether policies that affect the number of gangs will increase or decrease violence we need to know where they are on that inverted-U.

The model develops additional results and hypotheses that are more directly related to the ongoing academic literature attempting to estimate the impact of economic shocks on conflict outcomes. Those results suggest the possibility for systematic bias in some existing empirical work and show ways in which the theoretical results might help empirical researchers diagnose and address such biases.

(working paper)

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