Rohner, Dominic; Thoenig, Mathias; Zilibotti, Fabrizio - C.E.P.R. Discussion Papers - 2011
beliefs on the average propensity to trade of the other group. Since conflict disrupts trade, the onset of a conflict signals … that the aggressor has a low propensity to trade. Agents observe the history of conflicts and update their beliefs over … process whose frequency depends on the state of endogenous beliefs. Second, the probability of future conflicts increases …