How Opportunity Costs Decrease the Probability of War in an Incomplete Information Game
This paper shows that the opportunity costs resulting from economic interdependence decrease the equilibrium probability of war in an incomplete information game. This result is strongly consistent with existing empirical analyses of the inverse trade-conflict relationship, but is the opposite of the conclusion reached by Gartzke et al. (2001), who reject the opportunity cost argument in a game-theoretic framework. As a result of this paper's findings, one cannot dismiss the opportunity cost argument as the explanation why trading nations fight less. Instead this study reaffirms the central position of opportunity costs as the basis for the inverse trade-conflict relationship, thus implying that one need not rely on signaling.
|Date of creation:||Dec 2008|
|Publication status:||published in: International Organization, 2010, 64 (1), 133-144|
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2005. "Make trade not war ?," CEPREMAP Working Papers (Docweb) 0515, CEPREMAP.
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- James D. Morrow, 1999. "How Could Trade Affect Conflict?," Journal of Peace Research, Peace Research Institute Oslo, vol. 36(4), pages 481-489, July. Full references (including those not matched with items on IDEAS)
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