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Guns and Butter: Stability and Robustness

Author

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  • Choi Gyoung-Gyu

    (Department of Business Administration, Dongguk University, 30, Pildong-ro 1-gil, Jung-gu, Seoul 04620, Korea, Phone: +822-2260-8919)

Abstract

The paper considers the problem of allocating resources to economic goods and military goods (protecting property rights) in a contest model under an anarchic system which can be defined by the absence of a common superior authority to each state. I characterize the equilibrium and discuss its stability and robustness. The main finding is that if economic goods of the two states are complementary with Cobb-Douglas utility characteristics, the essential factor that affects a state’s resource allocation is its own maximum military level of production out of its resource endowment. In this sense, there is a unique stable equilibrium. This equilibrium is robust with the sequence of the states’ decisions insofar as the second mover’s observability is imperfect even slightly.

Suggested Citation

  • Choi Gyoung-Gyu, 2020. "Guns and Butter: Stability and Robustness," Asian Journal of Law and Economics, De Gruyter, vol. 11(1), pages 1-8, April.
    • Handle: RePEc:bpj:ajlecn:v:11:y:2020:i:1:p:8:n:5
    DOI: 10.1515/ajle-2020-0006
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    References listed on IDEAS

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    More about this item

    Keywords

    contest; defense economics; guns and butter; international security; strategic complementarity;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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