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A rationalist explanation of Russian risk-taking

Author

Listed:
  • Frank Lehrbass

    (FOM University of Applied Sciences in Düsseldorf, Germany)

  • Valentin Weinhold

    (University of Düsseldorf, Germany)

Abstract

Three seemingly unrelated topics of Russian politics are investigated. It is shown that under expected utility maximization the assumptions of an unbiased oil forward market and a risk-acceptant attitude (strictly convex utility function) are sufficient to explain Russia’s open position in oil and the bailout of Rosneft. The risk-acceptant attitude of the Russian leader also causes a shrunken bargaining range for the conflict in Ukraine, which can be enlarged by sanctions but not necessarily by the proliferation of weapons. This gives sanctions a clear edge over the proliferation of weapons.

Suggested Citation

  • Frank Lehrbass & Valentin Weinhold, 2016. "A rationalist explanation of Russian risk-taking," Economics of Peace and Security Journal, EPS Publishing, vol. 11(1), pages 5-11, April.
    • Handle: RePEc:epc:journl:v:11:y:2016:i:1:p:5-11
    as

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    File URL: http://www.epsjournal.org.uk/index.php/EPSJ/article/view/231
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    References listed on IDEAS

    as
    1. Hirshleifer, Jack, 1995. "Theorizing about conflict," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 7, pages 165-189, Elsevier.
    2. Sandler,Todd & Hartley,Keith, 1995. "The Economics of Defense," Cambridge Books, Cambridge University Press, number 9780521447287, January.
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    More about this item

    Keywords

    Sovereign risk management; commodity risk management; conflict in Ukraine;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation

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