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A Theory of Brinkmanship, Conflicts, and Commitments

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  • Schwarz, Michael
  • Sonin, Konstantin

Abstract

Many conflicts and negotiations can be viewed as a dynamic game, where parties have no commitment power. In our model, a potential aggressor demands concessions from the weaker party by threatening a war. The absence of commitment makes a continuous stream of transfers a more effective appeasement strategy than a lump sum transfer. Based on such a strategy, it is possible to construct a self-enforcing peace agreement between risk-neutral parties, even if transfers shift the balance of power. When parties are risk-averse, a self-enforcing peace agreement may not be feasible. The bargaining power of the potential aggressor increases dramatically if she is able to make probabilistic threats, e.g. by taking an observable action that leads to war with positive probability. This ‘brinkmanship strategy’ allows a blackmailer to extract a positive stream of payments from the victim even if carrying out the threat is harmful to both parties. Our results are applicable to environments ranging from diplomacy to negotiations within or among firms, and are aimed to bring together ‘parallel’ investigations in the nature of commitment in economics and political science.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5075.

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Date of creation: May 2005
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Handle: RePEc:cpr:ceprdp:5075

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Keywords: brinkmanship; commitments; conflicts; war and peace;

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  1. Sandeep Baliga & Tomas Sjostrom, 2001. "Arms Races and Negotiations," Economics Working Papers 0007, Institute for Advanced Study, School of Social Science.
  2. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  3. Avinash Dixit & Gene M. Grossman & Faruk Gul, 2000. "The Dynamics of Political Compromise," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 531-568, June.
  4. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June.
  5. Raghuram G. Rajan & Luigi Zingales, 1999. "The Tyranny of Inequality," CRSP working papers 423, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  6. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  7. Jack Hirshleifer, 2001. "Appeasement: Can It Work?," American Economic Review, American Economic Association, vol. 91(2), pages 342-346, May.
  8. Steven Shavell & Kathryn Spier, 1995. "Threats Without Binding Commitment," Discussion Papers 1139, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Daron Acemoglu & James A. Robinson, 2002. "Economic Backwardness in Political Perspective," NBER Working Papers 8831, National Bureau of Economic Research, Inc.
  10. Shavell Steven & Spier Kathryn E., 2002. "Threats Without Binding Commitment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-11, January.
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Cited by:
  1. Johannes Horner & Massimo Morelli & Francesco Squintani, 2010. "Mediation and Peace," Cowles Foundation Discussion Papers 1765, Cowles Foundation for Research in Economics, Yale University.
  2. Christian Fahrholz & Cezary Wójcik, 2010. "The Bail-Out! Positive Political Economics of Greek-type Crises in the EMU," CESifo Working Paper Series 3178, CESifo Group Munich.
  3. Pierre Yared & Gerard Padro i Miquel, 2010. "The Political Economy of Indirect Control," 2010 Meeting Papers 306, Society for Economic Dynamics.
  4. repec:cge:warwcg:66 is not listed on IDEAS
  5. Daron Acemoglu & Mikhail Golosov & Aleh Tsyvinski & Pierre Yared, 2012. "A Dynamic Theory of Resource Wars," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 283-331.
  6. Konstantin Sonin & Georgy Egorov & Daron Acemoglu, 2008. "Dynamics and Stability of Constitutions, Coalitions and Clubs," 2008 Meeting Papers 314, Society for Economic Dynamics.
  7. Jackson, Matthew O. & Morelli, Massimo, . "Political bias and war," Working Papers 1247, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Yared, Pierre, 2010. "A dynamic theory of war and peace," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1921-1950, September.

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