Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203599
Authors: 
Brekhov, Boris
Year of Publication: 
2019
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2019: 30 Jahre Mauerfall - Demokratie und Marktwirtschaft - Session: Political Economy III No. E01-V2
Abstract: 
I use game-theoretical models to compare a sender's expected payoff under two methods of wielding influence under incomplete information: offering rewards or threatening punishments. Attempts to influence another's behaviour can have the perverse effect of actually encouraging the behaviour that one is trying to discourage by creating, albeit different, incentives to bluff. Under a reward regime, targets can bluff in order to extort larger inducements. Under a sanction regime, targets can bluff in order to deter coercion attempts. I find that while sanctions are a weakly dominant tool of influence under complete information, rewards can be preferable under incomplete information. The sender often could do better by committing to a certain course of action for the entire duration of interaction. Moreover, using rewards and sanctions in combination can mitigate their adverse effects on targets' bluffing incentives when deploying only one instrument of influence separately.
Subjects: 
Economic Statecraft
Rewards
Sanctions
International Relations
International Organisations
Incomplete Information
Uncertainty
Game Theory
JEL: 
C72
D81
F35
F51
F53
Document Type: 
Conference Paper

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