Arms Races and Negotiations

Sandeep Baliga () and Tomas Sjostrom

No 7, Economics Working Papers from Institute for Advanced Study, School of Social Science

Abstract: A state which does not desire an arms race may nevertheless acquire new weapons if it believes another state will acquire them. If each state assigns some arbitrarily small probability to the event that the other state has a dominant strategy to acquire more weapons, then a multiplier effect appears, and the unique Bayesian Nash equilibrium involves an arms race with probability one. However, if the prior probability that a player is a dominant strategy type is sufficiently small, then there is an equilibrium of the cheap-talk extension of the arms race game where the probability of an arms race is close to zero.

Keywords: Multiplier Effect; Bayesian Nash Equilibrium; Cheap-talk Extension; Arms Race Game (search for similar items in EconPapers)
Pages: 26 pages
Date: 2001-03
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Citations: View citations in EconPapers (21)

Published in Review of Economic Studies Vol. 1(2) 2004 pp. 351-369

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Related works:
Journal Article: Arms Races and Negotiations (2004)
Working Paper: Arms Races and Negotiations (2003)
Working Paper: Arms Races and Negotiations (2001)
Working Paper: Arms Races and Negotiations (2001)
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