IDEAS home Printed from https://ideas.repec.org/a/sae/jocore/v36y1992i1p53-85.html
   My bibliography  Save this article

A Portfolio Diversification Model of Alliances

Author

Listed:
  • John A. C. Conybeare

    (University of Iowa)

Abstract

The theory of finance demonstrates that diversified investment portfolios produce superior combinations of risk and return, and that investors may choose a portfolio reflecting their preferred mix of risk and return. These techniques may be applied to military alliances. The rate of return and risk of an ally follows a positive linear relationship, as predicted by capital asset pricing theory. Random diversification of allies will, as with investment portfolios, reduce the country-unique components of alliance risk toward that which is inherent in the system as a whole. Some alliances will be more efficient at producing greater return and lower risk. The most efficient alliances will be those in which variations in ally effort move in opposite directions. Development of the demand side of portfolio analysis may predict which alliances are optimal, and therefore most likely to form. These principles are applied to the Triple Entente and Triple Alliance between 1879 and 1914. It is suggested that the Entente had superior efficiency characteristics and that ally choices were consistent with demand patterns.

Suggested Citation

  • John A. C. Conybeare, 1992. "A Portfolio Diversification Model of Alliances," Journal of Conflict Resolution, Peace Science Society (International), vol. 36(1), pages 53-85, March.
    • Handle: RePEc:sae:jocore:v:36:y:1992:i:1:p:53-85
    DOI: 10.1177/0022002792036001003
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0022002792036001003
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0022002792036001003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ordeshook,Peter C., 1986. "Game Theory and Political Theory," Cambridge Books, Cambridge University Press, number 9780521315937, September.
    2. de Mesquita, Bruce Bueno, 1985. "The War Trap Revisited: A Revised Expected Utility Model," American Political Science Review, Cambridge University Press, vol. 79(1), pages 156-177, March.
    3. Christensen, Thomas J. & Snyder, Jack, 1990. "Chain gangs and passed bucks: predicting alliance patterns in multipolarity," International Organization, Cambridge University Press, vol. 44(2), pages 137-168, April.
    4. Li, Richard P. Y. & Thompson, William R., 1978. "The Stochastic Process of Alliance Formation Behavior," American Political Science Review, Cambridge University Press, vol. 72(4), pages 1288-1303, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Courtois, Pierre & Figuieres, Charles & Mulier, Chloe & Weill, Joakim, 2018. "A Cost–Benefit Approach for Prioritizing Invasive Species," Ecological Economics, Elsevier, vol. 146(C), pages 607-620.
    2. Rizov, Marian, 2005. "Rural development under the European CAP: The role of diversity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 42(4), pages 621-628.
    3. Keith Hartley & Todd Sandler, 2001. "Economics of Alliances: The Lessons for Collective Action," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 869-896, September.
    4. Gregorius, Hans-Rolf & Gillet, Elizabeth M., 2008. "Generalized Simpson-diversity," Ecological Modelling, Elsevier, vol. 211(1), pages 90-96.
    5. Conrad, Jon M., 2018. "Real Options for Endangered Species," Ecological Economics, Elsevier, vol. 144(C), pages 59-64.
    6. repec:edn:sirdps:433 is not listed on IDEAS
    7. Sovacool, Benjamin K. & Mukherjee, Ishani, 2011. "Conceptualizing and measuring energy security: A synthesized approach," Energy, Elsevier, vol. 36(8), pages 5343-5355.
    8. Perry, Neil & Shankar, Sriram, 2017. "The State-contingent Approach to the Noah's Ark Problem," Ecological Economics, Elsevier, vol. 134(C), pages 65-72.
    9. Safarzynska, Karolina, 2017. "The Implications of Industrial Development for Diversification of Fuels," Ecological Economics, Elsevier, vol. 137(C), pages 37-46.
    10. Hein, Lars & Gatzweiler, Franz, 2006. "The economic value of coffee (Coffea arabica) genetic resources," Ecological Economics, Elsevier, vol. 60(1), pages 176-185, November.
    11. Gerber, Nicolas, 2011. "Biodiversity measures based on species-level dissimilarities: A methodology for assessment," Ecological Economics, Elsevier, vol. 70(12), pages 2275-2281.
    12. Gregorius, Hans-Rolf, 2012. "Assessing biological variation from the perspective of diversity," Ecological Modelling, Elsevier, vol. 224(1), pages 1-10.
    13. Pavoine, Sandrine & Bonsall, Michael B., 2009. "Biological diversity: Distinct distributions can lead to the maximization of Rao’s quadratic entropy," Theoretical Population Biology, Elsevier, vol. 75(2), pages 153-163.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arhan Ertan & Talbot Page & Louis Putterman, 2005. "Can Endogenously Chosen Institutions Mitigate the Free-Rider Problem and Reduce Perverse Punishment?," Working Papers 2005-13, Brown University, Department of Economics.
    2. Raimbault, Juste & Le Néchet, Florent, 2021. "Introducing endogenous transport provision in a LUTI model to explore polycentric governance systems," Journal of Transport Geography, Elsevier, vol. 94(C).
    3. Luterbacher Urs, 2004. "Conflict and Irrevocable Decisions," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 10(3), pages 1-9, December.
    4. Daniel E. Ingberman & Robert P. Inman, 1987. "The Political Economy of Fiscal Policy," NBER Working Papers 2405, National Bureau of Economic Research, Inc.
    5. Fritz W. Scharpf, 1991. "Games Real Actors Could Play: The Challenge of Complexity," Journal of Theoretical Politics, , vol. 3(3), pages 277-304, July.
    6. Leech, Dennis, 2002. "The Use of Coleman's Power Indices to Inform the Choice of Voting Rule with Reference to the IMF Governing Body and the EU Council of Ministers," Economic Research Papers 269458, University of Warwick - Department of Economics.
    7. James E. Alt & Barry Eichengreen, 1989. "Parallel And Overlapping Games: Theory And An Application To The European Gas Trade," Economics and Politics, Wiley Blackwell, vol. 1(2), pages 119-144, July.
    8. Paul D. Senese, 1997. "Costs and Demands," Journal of Conflict Resolution, Peace Science Society (International), vol. 41(3), pages 407-427, June.
    9. Thomas König & Thomas Bräuninger, 1996. "Power and Political Coordination in American and German Multi-Chamber Legislation," Journal of Theoretical Politics, , vol. 8(3), pages 331-360, July.
    10. M A Krajewska & H Kopfer & G Laporte & S Ropke & G Zaccour, 2008. "Horizontal cooperation among freight carriers: request allocation and profit sharing," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(11), pages 1483-1491, November.
    11. Vincent Anesi, 2012. "A new old solution for weak tournaments," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 39(4), pages 919-930, October.
    12. Edward P. Lazear, 2000. "Economic Imperialism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 99-146.
    13. Anton Lowenberg & Ben Yu, 1992. "Efficient constitution formation and maintenance: The role of “exit”," Constitutional Political Economy, Springer, vol. 3(1), pages 51-72, December.
    14. Michael W. Simon & Erik Gartzke, 1996. "Political System Similarity And The Choice of Allies," Journal of Conflict Resolution, Peace Science Society (International), vol. 40(4), pages 617-635, December.
    15. Michel Le Breton & John A. Weymark, 2002. "Social choice with analytic preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 19(3), pages 637-657.
    16. Peter Bearse & Buly A. Cardak & Gerhard Glomm & B. Ravikumar, 2009. "Why do Education Vouchers Fail?," CAEPR Working Papers 2009-014, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    17. Lockwood, Ben & Makris, Miltiadis, 2006. "Tax incidence, majority voting and capital market integration," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1007-1025, August.
    18. Madeleine Hosli & Rebecca Moody & Bryan O’Donovan & Serguei Kaniovski & Anna Little, 2011. "Squaring the circle? Collective and distributive effects of United Nations Security Council reform," The Review of International Organizations, Springer, vol. 6(2), pages 163-187, July.
    19. Kevin J. Sweeney, 2003. "The Severity of Interstate Disputes," Journal of Conflict Resolution, Peace Science Society (International), vol. 47(6), pages 728-750, December.
    20. Cardak, Buly A. & Glomm, Gerhard & Ravikumar, B., 2020. "Majority voting in a model of means testing," European Economic Review, Elsevier, vol. 122(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:jocore:v:36:y:1992:i:1:p:53-85. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://pss.la.psu.edu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.