The Uncertainty Trade-off: Reexamining Opportunity Costs and War

With Iris Malone.

Abstract: Conventional wisdom about economic interdependence and international conflict predicts increasing opportunity costs make war less likely, but some wars occur after costs grow. Why? We develop a model that shows a nonmonotonic relationship exists between the costs and probability of war when there is uncertainty over resolve. Under these conditions, increasing the costs of an uninformed party’s opponent has a second-order effect of exacerbating informational asymmetries about that opponent’s willingness to maintain peace. We derive conditions under which war can occur more frequently and empirically showcase the model’s implications through a case study of Sino-Indian relations from 1949 to 2007. This finding challenges how scholars traditionally believe economic interdependence mediate incentives to fight: instruments like trade have competing effects on the probability of war.

Published in International Studies Quarterly.

Publisher’s Version, Preprint