In a fourth eventuality the opposed family notices the couple’s flagrant breach of the peace agreement and induces a third party to intervene and render their opinion on whether hostile dam-building is a violation of property dispute norms. The third party arbitrator sees an opportunity to grow fat from the conflict and continually requests ever larger bribes from both sides before eventually drawing an arbitrary line in the ground and calling it a border. Of course the border isn’t amenable to either family, but they are powerless to challenge the will of the arbitrator because that would post facto make their bribes a waste and not improve their situation one bit. The arbitrator realizes there is a lot of free slack to be gobbled up in these property disputes and starts up his own racket.
Moral: don’t trust anybody to be fair to anybody but themselves.
This was a great comment right up until the moral. This is economics, mate! People “being fair” is irrelevant, we’re just talking incentives and negotiation and the rules of the game.
You’ve restated the moral in euphemistic terms. Some people do have the idea that they can trust others to give them a fair shake. That’s wrong. You’re right that the couple is behaving unfairly because of their own self-interest and the fact that they can get away with it, but regardless their actions are still unfair.
There’s a big difference between “we can’t trust people to be fair” and “fairness is irrelevant”. Irrelevance means that the rules remain the same even if people do try to be fair. In the arbitrator example, it may be that the arbitrator is trying to be fair but neither family wants a fair outcome, or it may be that the arbitrator has different ideas about what’s “fair”, or the arbitrator may be a whole company/government/institution in which each individual is trying to behave fairly but there’s selection pressure for those who pull in more resources. The picture ends up similar in all cases: the arbitrator has the power to impose their own preferred solution, ignoring the will of the families, so long as they don’t push too far and break the Schelling point (i.e. so long as they don’t demand so much so fast that the families mutually agree to find a new arbitrator).
I am not saying that the couple is behaving unfairly because of their own self-interest. I am saying that whether-or-not the couple is behaving unfairly is irrelevant; the rules of the game remain the same either way, and behavior can come from selection just as easily as intent.