Costly Interference: A Game Theoretic Analysis of Sanctions

Sanctions are often described as having two strikes against them: they are costly to the sanctioner, and they take time to achieve their goal, if they succeed at all. We argue in this paper that these are instead characteristics of rational sanctioning strategies. We view the sanctioning game as a subtle mix of bargaining and war of attrition. Our formal analysis shows that equilibrium behavior involves making one's opponent indifferent between accepting an ungenerous offer and continuing the struggle, a condition we call countervailing. Countervailing behavior implies that the costs incurred by the sanctioner correlate positively with the probability that the target will acquiesce to the sender's demands, and conversely. This insight runs counter to the conventional wisdom on the impact of costs in sanctioning episodes and suggests that policy makers think differently about the success or failure of sanctions.