Using a history-inspired game theoretic approach, the paper shows how dictatorship and pro-ethnic voting under democracy, in a society characterized by bi-communal polarization, can result in sub-optimal economic performance. The relatively poor economic outcome is facilitated by an adverse institutional construct, the constitution, which inadvertently encourages low intensity but persistent ethnic rivalry. Mutual distrust in how the other side will vote on the day of secret ballot induces the members of each group to vote for their respective elites, hence non-cooperation. The model is extended to include Gintis’ psychic gain parameter that shows cooperation is possible in the prisoners’ dilemma framework. The latter theoretical result implies a policy proposal of constitutional reform that promotes inter-group cooperation of the distribution of economic resources.
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