A Reputational Model of Conflict: Why Die to Win?

Jihong Lee

Associate Professor, Department of Economics, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 151-746, Korea, Tel: +82-2-880-6365, Fax: +82-2-886-4231 jihonglee@snu.ac.kr

JEL Classification: C72, D72, D74

Abstract

This paper considers a simple model of zero-sum conflict between two players (e.g., territorial dispute) in which costly actions (e.g., terrorism) are available to one side. We identify how reputation effects shape the outcome of such conflict. A small prior of fanatic commitment type induces the possibility of costly attack followed by withdrawal in equilibrium. The chance of withdrawal is proportional to the self-inflicted cost of attack.

Keywords:

Conflict, Terrorism, Reputation

Acknowledgments

The author is grateful to two anonymous referees for their helpful comments. This work was supported by the Je-Won Research Foundation Grant funded via the Institute of Economic Research at Seoul National University.

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