LEC5: Game Theory & Economic causes and consequences of war 1 Flashcards
What are the requirements for game theory?
- You have
more than one player. - Your payoff depends on others’ actions as well.
- Players are rational. They only care about their payoffs.
In defining games you need to look at three things:
1. Players: who are decision makers?
2. Actions: what can the players do?
3. Payoffs: what motivates the players?
What are the two different type of game theory games?
Games are often characterized by
the way or order in which the players move.
- In simultaneous/static games players makes their moves at the same time or their
moves are unseen by the other players.
- In sequential/dynamic games players make their moves in some sort of order or moves are seen by the other player and they respond to that.
What did Collier and Hoeffler identify in the relation to conflict?
The higher the income, the lower the
probability of conflict and vice versa.
What is the difference beteen Labour and Capital intensive commodities and the starting of conflict?
Labour-intensive commodities require a large amount of labour to be produced
relative to the amount of capital (labour-capital ratio is high). Like agriculture goods.
Growing prices of agricultural commodities reduce the likelihood of
armed conflict, as price increases of labour-intensive commodities such as
agricultural goods generate employment.
Capital-intensive commodities require a large amount of capital (labour-capital
ratio is low). Like the oil refining industry.
Growing prices of oil/gas commodities increases the likelihood of armed
conflict, as price increases of capital-intensive goods boost the returns to
(benefits from) fighting without offsetting opportunities for legal employment.
What is the role of interdependencies in the likelihood of conflict?
Bilateral trade and other economic interdependencies between states reduce the likelihood of conflict.
Opportunity cost mechanism: countries with high level of bilerateral trade have
more to lose when they go to war.
Signaling mechanisms: trade offers a new mechanisms for sending credible
signals and threats without resorting to war.
However, bilateral trade can also increase tensions, especially when countries display high export similarity.
Trade competition with third countries can rise.
Competition for scarce resources.
- States that export similar goods are likely to need the same inputs, including
rare earth minerals and high-tech goods. One may argue that consumer
demand is also a scarce resource over which exporters compete.
Supply issue
- The actions of one exporter can alter prices, affecting gains for the other.
How can domestic politics be a push factor of militarised conflict?
Exporters: Small group, losses from export competition concentrated and losses resulting from a potential militarised conflict shared with the public.
Public: large group, losses resulting from a potential militarised conflict dispersed.
Collective action problem, exporters are able to solve it, the public is not.
A problem of collective action: while it is in the interests of the group as a whole
to press for favourable policies, it is not in any individual’s interest to do so.
What are the costs of conflict?
- Direct Cost (Military, Peacebuilding)
- Indirect Cost (Forgone GDP)
- Multiplier Effect
The multiplier effect is a commonly used economic concept used to describe
the extent to which additional expentiture improves the wider economy. Every time there is an injection of new income into the economy this will lead to more
spending which will, in turn, create employment, further income and additional spending
What are the two elements of growth in the neoclassical economic growth model?
- Hours of work
- Labour productivity
Why is war a viscious cycle?
Negative economic growth is a major consequence of wars and conflicts, but it is also one of the main causes of wars and conflicts.
For some countries this may cause
a viscious cycle.
