Rational Appeasement

Since Munich, appeasement—a policy of making unilateral concessions in the hope of avoiding conflict—has been considered a disastrous strategy. Conceding to one adversary is thought to undermine the conceder's reputation for resolve, provoking additional challenges. Kreps, Wilson, Milgrom, and Roberts formalized this logic in their 1982 solutions to the “chain-store paradox.†I show with a series of models that if a state faces multiple challenges and has limited resources, the presumption against appeasement breaks down: appeasing in one arena may then be vital to conserve sufficient resources to deter in others. I identify “appeasement†and “deterrence†equilibria, and I show that when the stakes of conflict are either high or low, or when the costs of fighting are high, only appeasement equilibria exist. I illustrate the result with discussions of successful appeasement by Imperial Britain and unsuccessful attempts at reputation-building by Spain under Philip IV.I thank Rui de Figueiredo, Jim Fearon, Tim Groseclose, David Laitin, Ed Mansfield, James Morrow, Barry O'Neill, Bob Powell, Lawrence Saez, Ken Schultz, Art Stein, Marc Trachtenberg, Romain Wacziarg, Justin Wolfers, and other participants in seminars at the University of California, Berkeley, Stanford University, and the 2002 American Political Science Association meeting for helpful comments.