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Arms Races and Negotiations

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  • Sandeep Baliga
  • Tomas Sj�str�m
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    Abstract

    Two players simultaneously decide whether or not to acquire new weapons in an arms race game. Each player's type determines his propensity to arm. Types are private information, and are independently drawn from a continuous distribution. With probability close to one, the best outcome for each player is for neither to acquire new weapons (although each prefers to acquire new weapons if he thinks the opponent will). There is a small probability that a player is a dominant strategy type who always prefers to acquire new weapons. We find conditions under which the unique Bayesian-Nash equilibrium involves an arms race with probability one. However, if the probability that a player is a dominant strategy type is sufficiently small, then there is an equilibrium of the cheap-talk extension of the game where the probability of an arms race is close to zero. Copyright 2004, Wiley-Blackwell.

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    File URL: http://hdl.handle.net/10.1111/0034-6527.00287
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    Bibliographic Info

    Article provided by Oxford University Press in its journal The Review of Economic Studies.

    Volume (Year): 71 (2004)
    Issue (Month): 2 ()
    Pages: 351-369

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    Handle: RePEc:oup:restud:v:71:y:2004:i:2:p:351-369

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    Cited by:
    1. Blattman, Christopher & Miguel, Edward, 2009. "Civil War," Center for International and Development Economics Research, Working Paper Series qt90n356hs, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    2. Brendan O’Flaherty & Rajiv Sethi, 2010. "Peaceable Kingdoms and War Zones: Preemption, Ballistics and Murder in Newark," NBER Chapters, in: The Economics of Crime: Lessons for and from Latin America, pages 305-353 National Bureau of Economic Research, Inc.
    3. Sylvain Chassang & Gerard Padro i Miquel, 2008. "Conflict and Deterrence under Strategic Risk," NBER Working Papers 13964, National Bureau of Economic Research, Inc.
    4. Kim, Minseong & Kim, Young-Han, 2013. "When does coordination for free trade regimes fail?," Economic Modelling, Elsevier, vol. 31(C), pages 31-36.
    5. Dominic Rohner & Mathias Thoenig & Fabrizio Zilibotti, 2013. "War Signals: A Theory of Trade, Trust, and Conflict," Review of Economic Studies, Oxford University Press, vol. 80(3), pages 1114-1147.
    6. Christopher Blattman & Edward Miguel, 2009. "Civil War: A Review of Fifty Years of Research," Working Papers id:2231, eSocialSciences.
    7. Chirantan Ganguly & Indrajit Ray, 2013. "Information-Revelation and Coordination Using Cheap Talk in a Battle of the Sexes with Two-Sided Private Information," Discussion Papers 13-01r, Department of Economics, University of Birmingham.
    8. Sandeep Baliga & Tomas Sjostrom, 2009. "The Strategy of Manipulating Conflict," Departmental Working Papers 200906, Rutgers University, Department of Economics.
    9. Aviad Heifetz & Willemien Kets, 2013. "Robust Multiplicity with a Grain of Naiveté," Discussion Papers 1573, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Jung, Hanjoon Michael, 2007. "Strategic Information Transmission through the Media," MPRA Paper 5556, University Library of Munich, Germany, revised Oct 2007.
    11. Pierre Yared & Gerard Padro i Miquel, 2010. "The Political Economy of Indirect Control," 2010 Meeting Papers 306, Society for Economic Dynamics.
    12. Di Maggio, Marco, 2009. "Accountability and Cheap Talk," MPRA Paper 18652, University Library of Munich, Germany.

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