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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. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June.
  2. 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.
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  8. Jack Hirshleifer, 2001. "Appeasement: Can It Work?," American Economic Review, American Economic Association, vol. 91(2), pages 342-346, May.
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Cited by:
  1. Johannes Hoerner & Massimo Morelli & Francesco Squintani, 2011. "Mediation and Peace," Economics Working Papers ECO2011/19, European University Institute.
  2. Christian Fahrholz & Cezary Wojcik, 2010. "The Bail-Out! Positive political economics of Greek-type crises in the EMU," CASE Network Studies and Analyses 413, CASE-Center for Social and Economic Research.
  3. 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.
  4. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2012. "Dynamics and Stability of Constitutions, Coalitions, and Clubs," American Economic Review, American Economic Association, vol. 102(4), pages 1446-76, June.
  5. Jackson, Matthew O. & Morelli, Massimo, . "Political bias and war," Working Papers 1247, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. Yared, Pierre, 2010. "A dynamic theory of war and peace," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1921-1950, September.
  7. Pierre Yared & Gerard Padro i Miquel, 2010. "The Political Economy of Indirect Control," 2010 Meeting Papers 306, Society for Economic Dynamics.

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