Audience costs and reputation in crisis bargaining
Özyurt, Selçuk (2014) Audience costs and reputation in crisis bargaining. Games and Economic Behavior, 88 . pp. 250-259. ISSN 0899-8256
Official URL: http://dx.doi.org/10.1016/j.geb.2014.09.008
In crisis bargaining literature, it is conventional wisdom that the ability of generating higher audience costs is an advantage for a leader of a state. However, empirical studies show that democratic states use this mechanism only occasionally. This paper formally shows that higher audience costs may be good or bad depending on (1) the benefit-cost ratio of the crisis, (2) initial probability of resolve, and (3) how fast states generate audience costs with time. In particular, if the value of the prize over the cost of attacking is low or the initial probability of resolve is high enough, then having greater ability to generate audience costs may undermine democratic states' diplomatic success.
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