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The Prisoner's Dilemma and Regime-Switching in the Greek-Turkish Arms Race


  • Ron Smith

    (School of Economics, Mathematics and Statistics, Birkbeck College)

  • Martin Sola

    (School of Economics, Mathematics and Statistics, Birkbeck College and Department of Economics, Universidad Torcuata di Tella)

  • Fabio Spagnolo

    (School of Economics, Mathematics and Statistics, Birkbeck College)


Despite intensive investigation, little evidence has been found for a traditional Richardson-style arms race between Greece and Turkey using regression methods. This article uses an alternative model of the arms race, which treats it as a simple repeated two-by-two game such as the Prisoner's Dilemma, in which each country can choose a high or low share of military expenditure. This gives four possible states: both high; Greece high Turkey low; Turkey high Greece low; both low. The strategies of each country, the choice probabilities given the current state, are then estimated using a discrete state regime-switching model, which estimates the transition probabilities between the four states. Various hypotheses about these strategies are tested as restrictions on these transition probabilities. One set of hypotheses is that the countries play `tit-for-tat', doing what their opponent did in the previous period. This is rejected for both countries. Another hypothesis is that each country plays independently. Each country has its own probabilities of switching between high and low, which do not depend on whether the other country is high or low. This hypothesis is accepted by the data. The estimates of the transition probabilities suggest that the states, high or low shares of military expenditure, are very persistent, with very high probabilities of staying in them. The estimates are not consistent with a traditional `external' action-reaction explanation of shares of military expenditure, but are more consistent with `internal' explanations which emphasize bureaucratic and political inertia.

Suggested Citation

  • Ron Smith & Martin Sola & Fabio Spagnolo, 2000. "The Prisoner's Dilemma and Regime-Switching in the Greek-Turkish Arms Race," Journal of Peace Research, Peace Research Institute Oslo, vol. 37(6), pages 737-750, November.
  • Handle: RePEc:sae:joupea:v:37:y:2000:i:6:p:737-750

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    Cited by:

    1. J. Paul Dunne & Sam Perlo-Freeman & Ron Smith, 2008. "The Demand For Military Expenditure In Developing Countries: Hostility Versus Capability," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(4), pages 293-302.
    2. Walter Gutjahr, 2006. "Interaction dynamics of two reinforcement learners," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 14(1), pages 59-86, February.
    3. repec:kap:empiri:v:44:y:2017:i:2:d:10.1007_s10663-016-9316-8 is not listed on IDEAS
    4. Andreas S. Andreou & George A. Zombanakis, 2011. "Financial Versus Human Resources In The Greek--Turkish Arms Race 10 Years On: A Forecasting Investigation Using Artificial Neural Networks," Defence and Peace Economics, Taylor & Francis Journals, vol. 22(4), pages 459-469, November.
    5. J Paul Dunne & Sam Perlo-Freeman & Ron P Smith, 2009. "Determining Military Expenditures: Arms Races and Spill-Over Effects in Cross-Section and Panel Data," Working Papers 0901, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    6. Nadir Ocal, 2002. "Asymmetric effects of military expenditure between Turkey and Greece," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(5), pages 405-416.
    7. Bove Vincenzo & Gleditsch Kristian Skrede, 2011. "2010 Lewis Fry Richardson Lifetime Achievement Award: Ron P. Smith and the Economics of War and Peace," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 17(1), pages 1-12, December.
    8. J Paul Dunne & Sam Perlo-Freeman & Ron P Smith, 2008. "Determining Military Expenditures: Arms Races and Spill-Over Effects in Cross-Section and Panel Data," Discussion Papers 0801, British University in Egypt, Faulty of Business Administration, Economics and Political Science.
    9. Andreou, Andreas S. & Zombanakis, George A., 2010. "Financial vs human resources in the Greek-Turkish arms race 10 years on," MPRA Paper 38505, University Library of Munich, Germany.

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