War and Peace: How Economic Prospects Drive Conflictuality

Shuguang Jiang (), Marie Claire Villeval (), Zhengping Zhang () and Jie Zheng ()
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Shuguang Jiang: Centre for Economic Research, Shandong University, Jinan, Shandong, 250100, China
Marie Claire Villeval: CNRS, Université Lumière Lyon 2, Université Jean-Monnet Saint-Etienne, emlyon business school, GATE, 69007 Lyon, France; IZA, Bonn, Germany
Zhengping Zhang: Centre for Economic Research, Shandong University, Jinan, Shandong, 250100, China
Jie Zheng: Centre for Economic Research, Shandong University, Jinan, Shandong, 250100, China

No 2506, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

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.

Keywords: Conflict; Economic prospects; Thucydides’s Trap; Power shift; Experiment (search for similar items in EconPapers)
JEL-codes: C83 C91 D74 D91 F51 (search for similar items in EconPapers)
Date: 2025
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