Ulric B. and Evelyn L. Bray Social Sciences Seminar
Abstract: Using a simple conflict bargaining game, we study how the strategic interaction is shaped by underlying preferences over a contested territory and by the technology of conflict. We find a non-monotonic relationship between the cost of conflict and the probability of war, and conditions under which a conflict becomes more likely when a militarily weaker player catches up with a stronger one. With risk-averse players, the game has strategic complements if the cost of conflict is small and there is a large first-mover advantage, and strategic substitutes otherwise. This characterization generates predictions regarding strategic investments, e.g., in defense systems. A two-period version of the model illustrates the trade-off between expanding one's territory today and expecting more conflicts in the future. As a whole, our paper provides a micro foundation for Thomas Schelling's informal arguments and for the more recent formal models inspired by his work.