Economic Rewards versus Economic Sanctions in International Relations

Boris Brekhov

VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy from Verein für Socialpolitik / German Economic Association

Abstract: I use game-theoretical models to compare a sender's expected payoff under two methods of wielding influence under incomplete information: offering rewards or threatening punishments. Attempts to influence another's behaviour can have the perverse effect of actually encouraging the behaviour that one is trying to discourage by creating, albeit different, incentives to bluff. Under a reward regime, targets can bluff in order to extort larger inducements. Under a sanction regime, targets can bluff in order to deter coercion attempts. I find that while sanctions are a weakly dominant tool of influence under complete information, rewards can be preferable under incomplete information. The sender often could do better by committing to a certain course of action for the entire duration of interaction. Moreover, using rewards and sanctions in combination can mitigate their adverse effects on targets' bluffing incentives when deploying only one instrument of influence separately.

Keywords: Economic Statecraft; Rewards; Sanctions; International Relations; International Organisations; Incomplete Information; Uncertainty; Game Theory (search for similar items in EconPapers)
JEL-codes: C72 D81 F35 F51 F53 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/203599/1/VfS-2019-pid-27906.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc19:203599

Access Statistics for this paper

More papers in VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().