Cai, Hongbin - In: Contributions in Economic Analysis & Policy 2 (2003) 1, pp. 1-26
This paper studies a simple two-stage model of conflict in which two players allocate resources between arms and … domestic production in the first stage and subsequently engage in peace negotiations trying to avoid war. War is costly and war … those involving war. The two players will build more arms in any peace equilibrium than in the (unique) war equilibrium …