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Title:How opportunity costs decrease the probability of war in an incomplete information game PDF Logo
Authors:Polachek, Solomon W.
Xiang, Jun
Issue Date:2008
Series/Report no.:IZA discussion papers 3883
Abstract: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.
Subjects:War
conflict
trade
trade-conflict relationship
interdependence
incomplete information game
signaling
JEL:F10
Persistent Identifier of the first edition:urn:nbn:de:101:1-20081218105
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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