Stable alliance formation in distributional conflict

This paper develops a positive analysis of alliance formation, building on a simple economic model that features a “winner-take-all” contest for control of some resource. When an alliance forms, members pool their efforts in that contest and, if successful, apply the resource to a joint production process. Due to the familiar free-rider problem, the formation of alliances tends to reduce the severity of the conflict over the contestable resource. Despite the conflict that arises among the winning alliance's members over the distribution of their joint product, under reasonable conditions, this effect alone is sufficient to support stable alliance formation in a noncooperative equilibrium.