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Perfect equilibrium in a model of competitive arms accumulation

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  • van der Ploeg, F.
  • de Zeeuw, A.J.

    (Tilburg University, Faculty of Economics)

Abstract

This 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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(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • van der Ploeg, F. & de Zeeuw, A.J., 1987. "Perfect equilibrium in a model of competitive arms accumulation," Research Memorandum FEW 266, Tilburg University, School of Economics and Management.
  • Handle: RePEc:tiu:tiurem:6a60ef8b-7c1f-46b4-b861-da51db9dbca5
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    References listed on IDEAS

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    1. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    2. Buiter, Willem H, 1984. "Saddlepoint Problems in Continuous Time Rational Expectations Models: A General Method and Some Macroeconomic Examples," Econometrica, Econometric Society, vol. 52(3), pages 665-680, May.
    3. Rogoff, Kenneth, 1985. "Can international monetary policy cooperation be counterproductive?," Journal of International Economics, Elsevier, vol. 18(3-4), pages 199-217, May.
    4. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    Keywords

    Economics;

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