A growing body of field and experimental literature provides considerable evidence that individuals may adopt self-governing institutions that enable conflict resolution. This paper examines this issue by exploring the role of heterogeneity in individuals' production capabilities and past investments as an obstacle to conflict resolution. Results are presented from two ongoing research programs: (1) individual and group decision making in the context of a commonly held resource that is subtractable in units of appropriation and (2) ex post negotiation of surplus shares in incomplete contracts. Both programs have been designed to investigate conflict resolution when subjects are heterogenous in costly investments they have incurred.