Many conflicts and negotiations can be viewed as a dynamic game, where parties have no commitment power. In our model, a potential aggressor demands concessions from the weaker party by threatening a war. The absence of commitment makes a continuous stream of transfers a more effective appeasement strategy than a lump sum transfer. Based on such a strategy, it is possible to construct a self-enforcing peace agreement between risk-neutral parties, even if transfers shift the balance of power. When parties are risk-averse, a self-enforcing peace agreement may not be feasible. The bargaining power of the potential aggressor increases dramatically if she is able to make probabilistic threats, e.g. by taking an observable action that leads to war with positive probability. This 'brinkmanship strategy' allows a blackmailer to extract a positive stream of payments from the victim even if carrying out the threat is harmful to both parties. Our results are applicable to environments ranging from diplomacy to negotiations within or among firms, and are aimed to bring together 'parallel' investigations in the nature of commitment in economics and political science.
In this paper we study nationalizations in the oil industry around the world in 1960-2002. We show, both theoretically and empirically, that governments are more likely to nationalize when oil prices are high and when political institutions are weak. We consider a simple dynamic model of the interaction between a government and a foreign oil company. The government cannot commit to abstain from expropriation and the company cannot commit to pay high taxes. Even though nationalization is ine? cient it does occur in equilibrium when oil prices are high. The model?s predictions are consistent with the panel analysis of a comprehensive dataset on nationalizations in the oil industry since 1960. Nationalization is more likely to happen when oil prices are high and the quality of institutions is low even when controlling for country fixed effects.
To what extent do politicians reward voters who are members of their own ethnic or racial group? Using data from large cities in the United States, we study how black employment outcomes are affected by changes in the race of the cities’ mayors between 1973 and 2004. We find that relative to whites, black employment and labor force participation rise, and the black unemployment rate falls, during the tenure of black mayors. Black employment gains in municipal government jobs are particularly large, which suggests that our results capture causal effects of black mayors. Black mayors also lead to higher black incomes relative to white incomes. We show that our results continue to hold when we compare the treated cities to alternative control groups of cities, explicitly control for changing attitudes towards blacks or use regression discontinuity analysis to compare cities that elected black and white mayors in close elections. (JELD7, H7, J7).
This paper discusses systematically different concepts of anomie as an explanation of Group-focused Enmity (GFE) against selected groups in society. The GFE research programme has demonstrated the utility of applying the concept of anomia' - an individual reaction to disruptions in the normative order - to explain prejudices against vulnerable groups. This paper extends the GFE research programme by incorporating insights from Institutional Anomie Theory, a theoretical perspective originally introduced in the criminological literature. Drawing upon this, it develops a theoretical model that links perceptions of weakened non-economic institutions with prejudices against groups that are readily seen as being unprofitable'. These perceptions are theorized to affect prejudices against such groups via a pathway of marketized' attitudes and orientations, net of any influence of anomia. This paper's theoretical model was assessed with data from a representative survey of the German population (n = 840). The results of Structural Equation Modelling support most of the main hypotheses, revealing the additional value for prejudice research of measuring the individual experience of anomie not only as anomia but also with respect to processes of marketization.