| Publication |
2012.
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| Summary/Abstract |
The authors consider a two-period game of conflict between two factions, which have a desire for revenge. It is shown that, in contrast to conventional wisdom, the desire for revenge need not lead to escalation of the conflict. The subgame-perfect equilibrium is characterized by two effects: a value of revenge effect (i.e., the benefit of exacting revenge) and a self-deterrence effect (i.e., the fear of an opponent's desire to exact revenge). The authors construct examples where the equilibrium is such that the self-deterrence effect paradoxically outweighs the value effect and thereby decreases the factions' aggregate effort below the level exerted in the no-revenge case. This paradox of revenge is more likely, the more elastically the benefit of revenge reacts to the destruction suffered in the past and the more asymmetric is the conflict. The authors discuss the implications of revenge-dependent preferences for welfare economics, evolutionary stability, and their strategic value as commitment devices.
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