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The Sensitivity of Critical Risk Values to Small Changes in the Value of the Status Quo

Author

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  • Carlson Lisa J

    (University of Idaho)

  • Dacey Raymond

    (University of Idaho)

Abstract

This paper reports on a technical result that we have derived from various formal models that support a prospect-theoretic account of the traditional deterrence game. The result is as follows. In sequential prospect-theoretic play of the traditional deterrence game, under both one-sided and two-sided incomplete information, Challenger's decision over whether or not to threaten Defender can be remarkably sensitive to the specification of the model's parameter values, including very small changes in the valuation of the status quo.

Suggested Citation

  • Carlson Lisa J & Dacey Raymond, 2008. "The Sensitivity of Critical Risk Values to Small Changes in the Value of the Status Quo," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 13(2), pages 1-24, January.
    • Handle: RePEc:bpj:pepspp:v:13:y:2008:i:2:n:2
    DOI: 10.2202/1554-8597.1116
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    References listed on IDEAS

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    1. Jeffrey D. Berejikian, 2002. "A Cognitive Theory of Deterrence," Journal of Peace Research, Peace Research Institute Oslo, vol. 39(2), pages 165-183, March.
    2. Brock F. Tessman & Steve Chan, 2004. "Power Cycles, Risk Propensity, and Great-Power Deterrence," Journal of Conflict Resolution, Peace Science Society (International), vol. 48(2), pages 131-153, April.
    3. William Harbaugh & Kate Krause & Lise Vesterlund, 2002. "Risk Attitudes of Children and Adults: Choices Over Small and Large Probability Gains and Losses," Experimental Economics, Springer;Economic Science Association, vol. 5(1), pages 53-84, June.
    4. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    5. Lisa J. Carlson & Raymond Dacey, 2006. "Sequential Analysis of Deterrence Games with a Declining Status Quo," Conflict Management and Peace Science, Peace Science Society (International), vol. 23(2), pages 181-198, April.
    6. Christopher K. Butler, 2007. "Prospect Theory and Coercive Bargaining," Journal of Conflict Resolution, Peace Science Society (International), vol. 51(2), pages 227-250, April.
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