American Economic Review Vol. 83 No. 1 1993
The Macroeconomics of Dr. Strangelove
Abstract
This paper examines the weapons-accumulation decisions of two adversarial countries in the context of a deterrence/conflict initiation game embedded in an overlapping-generations model. The demographic structure permits analysis of both within- and between-country intergenerational externalities caused by past weapons-accumulation decisions, as well as of intragenerational externalities from the adversary's current weapons accumulation. Zero accumulation is a possible equilibrium with both noncooperative and cooperative behavior. Countries may also accumulate weapons to the point where conflict initiation never occurs. Pareto-improving policies are generally available, but international cooperation need not be Pareto-improving.
- Volume
- 83
- Issue
- 1
- Pages
- 43-62
- Sources
- bibtex:phds-export.bib