Positional Advantage and Predatory Equilibria

Abstract

This paper considers. analysing a conflict between the prey and predator in a general equilibrium framework, how interactions among positional advantage, resource disparity, and the effectiveness of offense relative to defense affect the allocations of resources. Compared to the Nash equilibria, the prey, as a Stackelberg leader, tends to allocate more of resources to defense to utilize the deterrent effect of defense. The prey gains at the expense of the predator and the total consumable output of the economy. In contrast, as a Stackelberg leader, The predator, due to the provoking effect of offense, allocates less of resources to offense. This induces the prey to devote more of resources to production. The predator has an interest in enlarging the appropriable output even though he gets a smaller share. It is shown that both parties prefer the predator to be Stackelberg leader.