Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/319092 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17823
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We experimentally study how economic prospects and power shifts affect the risk of conflict through a dynamic power rivalry game. Players decide whether to maintain the status quo or challenge a rival under declining, constant, or growing economic prospects. We find that conflict rates are highest when economic prospects decline and lowest when they improve. A behavioral model incorporating psychological costs and reciprocity can explain these differences. A survey on U.S.-China relations supports the real-world relevance of these findings. Inspired by the Thucydides's Trap, this study highlights how economic expectations shape conflict dynamics, offering key insights into geopolitical stability.
Subjects: 
Thucydides's Trap
economic prospects
conflict
power shift
experiment
JEL: 
C83
C91
D74
D91
F51
Document Type: 
Working Paper

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