Economic Interdependence and Peace: A Game-Theoretic Analysis

Most of the contemporary policy debate regarding economic interdependence and peace has focused on devising responses either in favor of or in opposition to the long prevailing notion that trade is positively and unconditionally correlated with peace. The China and Taiwan case – noteworthy for the simultaneous presence of an ever-increasing economic interdependence and an adversarial political relationship -- provides an interesting counter-example to the leading positions in the literature. What is missing in the literature is a model that studies states’ decisions to trade and initiate conflict as a function, not only of their own utility, but also of their perceptions about how their opponent will respond. States’ decisions to trade depend upon the likelihood that their prospective trade partner will initiate a conflict, and decisions to initiate a conflict depend upon perceptions of the likelihood that the target will concede. In this paper, we develop a model that expands the domain of the trade-peace analysis by endogenizing and analyzing states’ decisions to trade and initiate conflicts.

Duke Scholars

Author Emerson S. Niou Political Science