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International Security, Multiple Public Good Provisions, and The Exploitation Hypothesis


  • Toshihiro Ihori
  • Martin McGuire
  • Shintaro Nakagawa


Since the 1960s Olson-Zeckhauser's (1966) analysis, its 'exploitation of the great by the small' has provided economists' core model of alliance's provision of security/defense. But with the end of the Cold War, countries' allocative behavior has diverged markedly from OZ's predictions for defense as a homogeneous pure public good voluntarily provided. This paper suggests a replacement for OZ, with the essential difference that 'defense' rather than being aggregated into their single public good is disaggregated into more realistic categories of self-insurance and self-protection. Because allocative behavior in public good groups is essentially driven by income effects, we concentrate on these, which become complex and conflicted, giving much greater scope for goods-inferiority. The analysis is followed by numerical simulations, which conform to actual experienced allocations in NATO much better than the conventional 'exploitation' model.

Suggested Citation

  • Toshihiro Ihori & Martin McGuire & Shintaro Nakagawa, 2014. "International Security, Multiple Public Good Provisions, and The Exploitation Hypothesis," Defence and Peace Economics, Taylor & Francis Journals, vol. 25(3), pages 213-229, June.
  • Handle: RePEc:taf:defpea:v:25:y:2014:i:3:p:213-229
    DOI: 10.1080/10242694.2012.752229

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    References listed on IDEAS

    1. Sandler,Todd & Hartley,Keith, 1995. "The Economics of Defense," Cambridge Books, Cambridge University Press, number 9780521447287, April.
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    Cited by:

    1. Wolfgang Buchholz & Todd Sandler, 2016. "The Exploitation Hypothesis in a Public Good Economy: Some Extensions," CESifo Working Paper Series 5717, CESifo Group Munich.
    2. Wolfgang Buchholz & Todd Sandler, 2016. "Olson’s exploitation hypothesis in a public good economy: a reconsideration," Public Choice, Springer, vol. 168(1), pages 103-114, July.
    3. Vesa Kanniainen & Staffan Ringbom, 2015. "The Value of NATO Option for a New Member," CESifo Working Paper Series 5399, CESifo Group Munich.

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