IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_10443.html
   My bibliography  Save this paper

Economic Warfare

Author

Listed:
  • Daniel Spiro

Abstract

What actions should we expect countries to take when engaged in economic warfare? This paper first shows that the goal of winning a war implies a very simple and intuitive objective of economic warfare: maximize one’s own less the opponent’s (weight-adjusted) payoff. This objective function is then applied to a number of canonical strategic economic environments showing how warfare transforms them. In a warfare-equilibrium between a buyer and a seller, the traded quantity is lower than in peace but, surprisingly, the price may be lower. The analysis shows when trade will altogether collapses in war and when trade will persist between the parties despite it. A prisoner’s-dilemma game (e.g., monopolistic competition or climate-change mitigation) remains a prisoner's-dilemma game also in war, and cooperation may be impossible also under infinite repetition. A coordination game with heterogeneous preferences (e.g., choosing technological standard) in war collapses to either deliberate miscoordination or to ‘matching pennies’ where one country is trying to imitate the other which is trying to avoid this. The results are interpreted through the lens of the current economic warfare between Russia and the West.

Suggested Citation

  • Daniel Spiro, 2023. "Economic Warfare," CESifo Working Paper Series 10443, CESifo.
    • Handle: RePEc:ces:ceswps:_10443
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10443.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ingela Alger, 2010. "Public Goods Games, Altruism, and Evolution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(4), pages 789-813, August.
    2. William H. Kaempfer & Anton D. Lowenberg, 1986. "A Model of the Political Economy of International Investment Sanctions: The Case of South Africa," Kyklos, Wiley Blackwell, vol. 39(3), pages 377-396, August.
    3. Jeffrey Clemens, 2013. "An Analysis of Economic Warfare," American Economic Review, American Economic Association, vol. 103(3), pages 523-527, May.
    4. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(3), pages 379-414, July.
    5. Morgan John & Steiglitz Ken & Reis George, 2003. "The Spite Motive and Equilibrium Behavior in Auctions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-25, April.
    6. Maria Montero, 2008. "Altruism, Spite and Competition in Bargaining Games," Theory and Decision, Springer, vol. 65(2), pages 125-151, September.
    7. Gros, Daniel, 2022. "Optimal tariff versus optimal sanction: The case of European gas imports from Russia," CEPS Papers 36006, Centre for European Policy Studies.
    8. Lina Andersson, 2020. "Cooperation between Emotional Players," Games, MDPI, vol. 11(4), pages 1-16, October.
    9. Mark Fey & Kristopher W. Ramsay, 2011. "Uncertainty and Incentives in Crisis Bargaining: Game‐Free Analysis of International Conflict," American Journal of Political Science, John Wiley & Sons, vol. 55(1), pages 149-169, January.
    10. Henrik Wachtmeister & Johan Gars & Daniel Spiro, 2022. "Quantity restrictions and price discounts on Russian oil," Papers 2212.00674, arXiv.org, revised Dec 2022.
    11. Cai Hongbin, 2003. "War or Peace," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-26, February.
    12. Ingela Alger, 2010. "Corrigendum: Public Goods Games, Altruism, and Evolution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(6), pages 1135-1135, December.
    13. Milchtaich, Igal, 2012. "Comparative statics of altruism and spite," Games and Economic Behavior, Elsevier, vol. 75(2), pages 809-831.
    Full references (including those not matched with items on IDEAS)

    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. Ingela Alger & Jörgen W. Weibull, 2013. "Homo Moralis—Preference Evolution Under Incomplete Information and Assortative Matching," Econometrica, Econometric Society, vol. 81(6), pages 2269-2302, November.
    2. Alger, Ingela & Weibull, Jörgen W., 2014. "Evolution leads to Kantian morality," TSE Working Papers 14-504, Toulouse School of Economics (TSE), revised Jun 2015.
    3. Laurence Kranich, 2022. "Affective social policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(2), pages 362-379, April.
    4. Yuleng Zeng, 2020. "Bluff to peace: How economic dependence promotes peace despite increasing deception and uncertainty," Conflict Management and Peace Science, Peace Science Society (International), vol. 37(6), pages 633-654, November.
    5. Ingela Alger & Donald Cox, 2013. "The evolution of altruistic preferences: mothers versus fathers," Review of Economics of the Household, Springer, vol. 11(3), pages 421-446, September.
    6. Lahkar, Ratul, 2019. "Elimination of non-individualistic preferences in large population aggregative games," Journal of Mathematical Economics, Elsevier, vol. 84(C), pages 150-165.
    7. Wu, Jiabin, 2017. "Political institutions and the evolution of character traits," Games and Economic Behavior, Elsevier, vol. 106(C), pages 260-276.
    8. Ennio Bilancini & Leonardo Boncinelli & Jiabin Wu, 2016. "The Interplay of Cultural Aversion and Assortativity for the Emergence of Cooperation," Center for Economic Research (RECent) 121, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    9. William Spaniel, 2020. "Power transfers, military uncertainty, and war," Journal of Theoretical Politics, , vol. 32(4), pages 538-556, October.
    10. Ingela Alger & Laurent Lehmann, 2023. "Evolution of Semi-Kantian Preferences in Two-Player Assortative Interactions with Complete and Incomplete Information and Plasticity," Dynamic Games and Applications, Springer, vol. 13(4), pages 1288-1319, December.
    11. Alger, Ingela & Weibull, Jörgen W., 2016. "Evolution and Kantian morality," Games and Economic Behavior, Elsevier, vol. 98(C), pages 56-67.
    12. repec:aia:ginidp:dp17 is not listed on IDEAS
    13. Tóbiás, Áron, 2023. "Rational Altruism," Journal of Economic Behavior & Organization, Elsevier, vol. 207(C), pages 50-80.
    14. Wladislaw Mill & Jonathan Staebler, 2023. "Spite in Litigation," CRC TR 224 Discussion Paper Series crctr224_2023_401, University of Bonn and University of Mannheim, Germany.
    15. Philip Arena, 2015. "Crisis bargaining, domestic opposition, and tragic wars," Journal of Theoretical Politics, , vol. 27(1), pages 108-131, January.
    16. Garoupa, Nuno R & Gata, Joao E, 2002. "A Theory of International Conflict Management and Sanctioning," Public Choice, Springer, vol. 110(1-2), pages 41-65, January.
    17. Wu, Jiabin, 2016. "Political Institutions and Preference Evolution," MPRA Paper 69597, University Library of Munich, Germany.
    18. Jiabin Wu, 2017. "Social Hierarchy and the Evolution of Behavior," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-16, December.
    19. Caichun Chai & Eilin Francis & Tiaojun Xiao, 2021. "Supply chain dynamics with assortative matching," Journal of Evolutionary Economics, Springer, vol. 31(1), pages 179-206, January.
    20. Alger, Ingela & Lehmann, Laurent & Weibull, Jörgen W., 2018. "Evolution of preferences in group-structured populations: genes, guns, and culture," IAST Working Papers 18-73, Institute for Advanced Study in Toulouse (IAST), revised Oct 2019.
    21. Jiabin Wu, 2020. "Labelling, homophily and preference evolution," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(1), pages 1-22, March.

    More about this item

    Keywords

    economic warfare; conflict; sanction; trade;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ces:ceswps:_10443. 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: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    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.