A general equilibrium model of two group conflict with endogenous intra-group sharing rules

This paper explores the interactions among intra-group sharing rules, the competition between two groups over the common pool of output, and the allocation of resources between productive and appropriate activities. In the interior solution, the use of egalitarian method for the distribution of group income among members plays no distributional role but only affects the allocation of resources. It releases resources into the productive sector from the group that adopts the egalitarian rule by making the internal conflict among the members less intense. The sequential choice of intra-group sharing rules and resource allocations produce the adoption of fully egalitarian intra-group sharing rules in both groups. These rules minimize the amount of resources allocated to appropriate activities and maximize the welfare level of all individuals in the economy. This result suggests that inter-group competition with the use of egalitarian principle in the distribution of group income among group members, which is not available to the Hobbesian state of nature, is one of the cheaper social devices in restraining individuals from engaging in costly appropriative activities.