Defence Commitment and Deterrence in the Theory of War

Author:

Kanniainen, Vesa  

Journal:

CESIFO ECONOMIC STUDIES

Issue Date:

2018

Abstract(summary):

The article shows that a defending army, particularly a small one, can fight hard when attacked by a predator. The result arises in the commitment equilibrium of a model with intergenerational altruism. By implication, the article offers a novel theory of deterrence and defence policy. It shows that in the absence of informational constraints, there is a unique army size that is sufficient for deterrence. Under informational restrictions, a pooling equilibrium may exist where a victim with strong intergenerational altruism overinvests in its army, while the victim with a more limited altruism free rides on the information gap of the predator and builds a smaller army. Conditions for the existence of a separating equilibrium are established in terms of the cost of war. It turns out that the optimal defence policy need not satisfy the deterrence requirement. The case of separating equilibrium helps to explain why wars exist in equilibrium.

Page:

617---638