Tullock contest alliances with proportional prize-sharing agreements: private collective action mechanisms?

This paper focuses on humanity’s supposedly irrational behavior in conflict decision-making, challenging two rationalist puzzles in political science and economics: war’s inefficiency and alliance formation. More specifically, we ask whether alliances can benefit the allies. Standard Tullock contest alliances are plagued by free riding, undermining successful collective action. In a three-party contest environment when two of the parties ally, input substitution and fixed prize division hinder collective action. Analyzing the same contest with input-cost complementarity and proportional prize division, we propose a transformative solution that avoids the usual problems of alliance formation and stability. While input-cost complementarity partially mitigates those concerns, a proportional prize-sharing agreement offers a comprehensive remedy, ensuring equitable contributions and gains for the allied parties. The proposed approach not only resolves the alliance-formation puzzle but also enhances the allies’ prospects for success.