IDEAS home Printed from https://ideas.repec.org/p/edn/esedps/198.html
   My bibliography  Save this paper

Optimism and commitment: An elementary theory of bargaining and war

Author

Abstract

We propose an elementary theory of wars fought by fully rational contenders. Two parties play a Markov game that combines stages of bargaining with stages where one side has the ability to impose surrender on the other. Under uncertainty and incomplete information, in the unique equilibrium of the game, long confrontations occur: war arises when reality disappoints initial (rational) optimism, and it persist longer when both agents are optimists but reality proves both wrong. Bargaining proposals that are rejected initially might eventually be accepted after several periods of confrontation. We provide an explicit computation of the equilibrium, evaluating the probability of war, and its expected losses as a function of i) the costs of confrontation, ii) the asymmetry of the split imposed under surrender, and iii) the strengths of contenders at attack and defence. Changes in these parameters display non-monotonic effects.

Suggested Citation

  • Clara Ponsati & Santiago Sanchez-Pages, 2010. "Optimism and commitment: An elementary theory of bargaining and war," Edinburgh School of Economics Discussion Paper Series 198, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:198
    as

    Download full text from publisher

    File URL: http://www.econ.ed.ac.uk/papers/id198_esedps.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Santiago Sánchez‐Pagés, 2009. "Conflict as a Part of the Bargaining Process," Economic Journal, Royal Economic Society, vol. 119(539), pages 1189-1207, July.
    2. Powell, Robert, 1996. "Bargaining in the Shadow of Power," Games and Economic Behavior, Elsevier, vol. 15(2), pages 255-289, August.
    3. Santiago Sanchez-Pages, 2009. "Bargaining and Conflict with Incomplete Information," Edinburgh School of Economics Discussion Paper Series 191, Edinburgh School of Economics, University of Edinburgh.
    4. Kristian Gleditsch, 2004. "A Revised List of Wars Between and Within Independent States, 1816-2002," International Interactions, Taylor & Francis Journals, vol. 30(3), pages 231-262, July.
    5. Merlo, Antonio & Wilson, Charles A, 1995. "A Stochastic Model of Sequential Bargaining with Complete Information," Econometrica, Econometric Society, vol. 63(2), pages 371-399, March.
    6. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(3), pages 379-414, July.
    7. Beviá, Carmen & Corchón, Luis C., 2010. "Peace agreements without commitment," Games and Economic Behavior, Elsevier, vol. 68(2), pages 469-487, March.
    8. Robert Powell, 2004. "Bargaining and Learning While Fighting," American Journal of Political Science, John Wiley & Sons, vol. 48(2), pages 344-361, April.
    9. Slantchev, Branislav L., 2003. "The Principle of Convergence in Wartime Negotiations," American Political Science Review, Cambridge University Press, vol. 97(4), pages 621-632, November.
    10. Alastair Smith & Allan C. Stam, 2004. "Bargaining and the Nature of War," Journal of Conflict Resolution, Peace Science Society (International), vol. 48(6), pages 783-813, December.
    11. Bahar Leventoğlu & Branislav L. Slantchev, 2007. "The Armed Peace: A Punctuated Equilibrium Theory of War," American Journal of Political Science, John Wiley & Sons, vol. 51(4), pages 755-771, October.
    12. Fearon, James D., 1994. "Domestic Political Audiences and the Escalation of International Disputes," American Political Science Review, Cambridge University Press, vol. 88(3), pages 577-592, September.
    13. Schultz, Kenneth A., 1998. "Domestic Opposition and Signaling in International Crises," American Political Science Review, Cambridge University Press, vol. 92(4), pages 829-844, December.
    14. Branislav L. Slantchev, 2004. "How Initiators End Their Wars: The Duration of Warfare and the Terms of Peace," American Journal of Political Science, John Wiley & Sons, vol. 48(4), pages 813-829, October.
    15. Helmut Bester & Karl Wärneryd, 2006. "Conflict and the Social Contract," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(2), pages 231-249, July.
    16. Garfinkel, Michelle R. & Skaperdas, Stergios (ed.), 2012. "The Oxford Handbook of the Economics of Peace and Conflict," OUP Catalogue, Oxford University Press, number 9780195392777, Decembrie.
    17. Powell, Robert, 2006. "War as a Commitment Problem," International Organization, Cambridge University Press, vol. 60(1), pages 169-203, January.
    18. Matthew O. Jackson & Massimo Morelli, 2007. "Political Bias and War," American Economic Review, American Economic Association, vol. 97(4), pages 1353-1373, September.
      • Jackson, Matthew O. & Morelli, Massimo, "undated". "Political bias and war," Working Papers 1247, California Institute of Technology, Division of the Humanities and Social Sciences.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Are wars rational?
      by Economic Logician in Economic Logic on 2011-01-11 22:11:00

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sanchez-Pages, Santiago, 2009. "Bargaining and Conflict with Incomplete Information," SIRE Discussion Papers 2009-55, Scottish Institute for Research in Economics (SIRE).
    2. Richard Jordan, 2021. "Symbolic victories and strategic risk," Journal of Peace Research, Peace Research Institute Oslo, vol. 58(5), pages 973-985, September.
    3. Nakao, Keisuke, 2022. "Democratic Victory and War Duration: Why Are Democracies Less Likely to Win Long Wars?," MPRA Paper 112849, University Library of Munich, Germany.
    4. Vahabi,Mehrdad, 2019. "The Political Economy of Predation," Cambridge Books, Cambridge University Press, number 9781107591370, January.
    5. Clayton Thyne, 2017. "The impact of coups d’état on civil war duration," Conflict Management and Peace Science, Peace Science Society (International), vol. 34(3), pages 287-307, May.
    6. Eric Min, 2021. "Interstate War Battle dataset (1823–2003)," Journal of Peace Research, Peace Research Institute Oslo, vol. 58(2), pages 294-303, March.
    7. Kim, Jin Yeub, 2018. "Counterthreat of attack to deter aggression," Economics Letters, Elsevier, vol. 167(C), pages 112-114.
    8. Max Gallop, 2017. "More dangerous than dyads: how a third party enables rationalist explanations for war," Journal of Theoretical Politics, , vol. 29(3), pages 353-381, July.
    9. Peter Bils & William Spaniel, 2017. "Policy bargaining and militarized conflict," Journal of Theoretical Politics, , vol. 29(4), pages 647-678, October.
    10. Matthew O. Jackson & Massimo Morelli, 2011. "The Reasons for Wars: An Updated Survey," Chapters, in: Christopher J. Coyne & Rachel L. Mathers (ed.), The Handbook on the Political Economy of War, chapter 3, Edward Elgar Publishing.
    11. Marco Nilsson, 2018. "Causal beliefs and war termination," Journal of Peace Research, Peace Research Institute Oslo, vol. 55(1), pages 94-106, January.
    12. Yuleng Zeng, 2020. "Bluff to peace: How economic dependence promotes peace despite increasing deception and uncertainty," Conflict Management and Peace Science, Peace Science Society (International), vol. 37(6), pages 633-654, November.
    13. John Tyson Chatagnier, 2015. "Conflict bargaining as a signal to third parties," Journal of Theoretical Politics, , vol. 27(2), pages 237-268, April.
    14. Sambuddha Ghosh & Gabriele Gratton & Caixia Shen, 2019. "Intimidation: Linking Negotiation And Conflict," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(4), pages 1589-1618, November.
    15. Paul F. Diehl, 2006. "Just a Phase?: Integrating Conflict Dynamics Over Time," Conflict Management and Peace Science, Peace Science Society (International), vol. 23(3), pages 199-210, July.
    16. Jelnov, Artyom & Tauman, Yair & Zeckhauser, Richard, 2018. "Confronting an enemy with unknown preferences: Deterrer or provocateur?," European Journal of Political Economy, Elsevier, vol. 54(C), pages 124-143.
    17. Jelnov, Artyom & Tauman, Yair & Zeckhauser, Richard, 2017. "Attacking the unknown weapons of a potential bomb builder: The impact of intelligence on the strategic interaction," Games and Economic Behavior, Elsevier, vol. 104(C), pages 177-189.
    18. Philip Arena, 2015. "Crisis bargaining, domestic opposition, and tragic wars," Journal of Theoretical Politics, , vol. 27(1), pages 108-131, January.
    19. Yuleng Zeng, 2021. "Biding time versus timely retreat: Asymmetric dependence, issue salience, and conflict duration," Journal of Peace Research, Peace Research Institute Oslo, vol. 58(4), pages 719-733, July.
    20. Mark Fey & Kristopher Ramsay, 2009. "Mechanism design goes to war: peaceful outcomes with interdependent and correlated types," Review of Economic Design, Springer;Society for Economic Design, vol. 13(3), pages 233-250, September.

    More about this item

    Keywords

    bargaining; incomplete information; commitment; war;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Economic Logic blog

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:edn:esedps:198. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Research Office (email available below). General contact details of provider: https://edirc.repec.org/data/deediuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.