Perfect equilibrium in a model of competitive arms accumulation
AbstractThis paper shows that the subgame-perfect Nash strategic equilibrium, which is relevant when countries can monitor their rival's weapon stock, leads to lower levels of arms and higher welfare than the standard open-loop Nash strategic equilibrium for an arms race. This result is derived for a model of competitive arms accumulation, in which two countries face a classic "guns versus butter" dilemma in the form of utilities that depend on consumption, leisure, and the characteristic defense. Moreover, it is argued that the perfect equilibrium strategies lead to a more satisfactory strategic underpinning of the well-know Richardson equations. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoPaper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-377522.
Date of creation: 1990
Date of revision:
Publication status: Published in International Economic Review (1990) v.31, p.131-146
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Other versions of this item:
- van der Ploeg, F & de Zeeuw, A J, 1990. "Perfect Equilibrium in a Model of Competitive Arms Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 131-46, February.
- Ploeg, F. van der & Zeeuw, A.J. de, 1987. "Perfect equilibrium in a model of competitive arms accumulation," Research Memorandum 266, Tilburg University, Faculty of Economics and Business Administration.
- Ploeg, F. van der & Zeeuw, A.J. de, 1988. "Perfect equilibrium in a model of competitive arms accumulation," Discussion Paper 1988-4, Tilburg University, Center for Economic Research.
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