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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

4 Issues per year


IMPACT FACTOR 2016: 0.252
5-year IMPACT FACTOR: 0.755

CiteScore 2016: 0.48

SCImago Journal Rank (SJR) 2016: 0.330
Source Normalized Impact per Paper (SNIP) 2016: 0.526

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ISSN
1935-1682
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Volume 2, Issue 1 (Feb 2003)

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Volume 6 (2006)

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Volume 2 (2002)

Volume 1 (2001)

War or Peace

Hongbin Cai
Published Online: 2003-02-26 | DOI: https://doi.org/10.2202/1538-0645.1052

Abstract

This paper studies a simple two-stage model of conflict in which two players allocate resources between arms and domestic production in the first stage and subsequently engage in peace negotiations trying to avoid war. War is costly and war damages depend on arms buildup. Peace also comes with costs (e.g., disarmament, monitoring and enforcement). We show that when the cost of peace is in the medium range and resources are more effective in causing damages to one's enemy when invested in arms than in being productive in domestic production, the game has two kinds of equilibria: those involving peace and those involving war. The two players will build more arms in any peace equilibrium than in the (unique) war equilibrium. When the cost of peace is unknown to the players while making investment choices, arms levels in equilibrium are positively correlated with the probability of peace.

Keywords: war; peace; arms race; conflict; bargaining

About the article

Published Online: 2003-02-26


Citation Information: Contributions in Economic Analysis & Policy, ISSN (Online) 1538-0645, DOI: https://doi.org/10.2202/1538-0645.1052.

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