War and Peace: How Economic Prospects Drive Conflictuality

How do future economic prospects influence the likelihood of cooperation or conflict between rising and established powers? Drawing on Thucydides’s Trap, we test power transitions in varying economic conditions experimentally. In a dynamic power rivalry game participants could either maintain the status quo or challenge the rival, under declining, constant, or growing economic prospects. Our results reveal that conflict rates are highest when economic prospects decline and lowest when they grow. An established power is less likely to challenge in the initial periods under growth prospects, which moderates the rising power’s subsequent challenging behavior. A behavioral model with psychological costs for challenging and reciprocity helps rationalize the observed treatment differences. A survey with a representative sample in the U.S. suggests that the dynamics observed in the game hold real-world relevance.