IDEAS home Printed from https://ideas.repec.org/p/zbw/vfsc19/203599.html
   My bibliography  Save this paper

Economic Rewards versus Economic Sanctions in International Relations

Author

Listed:
  • Brekhov, Boris

Abstract

I use game-theoretical models to compare a sender's expected payoff under two methods of wielding influence under incomplete information: offering rewards or threatening punishments. Attempts to influence another's behaviour can have the perverse effect of actually encouraging the behaviour that one is trying to discourage by creating, albeit different, incentives to bluff. Under a reward regime, targets can bluff in order to extort larger inducements. Under a sanction regime, targets can bluff in order to deter coercion attempts. I find that while sanctions are a weakly dominant tool of influence under complete information, rewards can be preferable under incomplete information. The sender often could do better by committing to a certain course of action for the entire duration of interaction. Moreover, using rewards and sanctions in combination can mitigate their adverse effects on targets' bluffing incentives when deploying only one instrument of influence separately.

Suggested Citation

  • Brekhov, Boris, 2019. "Economic Rewards versus Economic Sanctions in International Relations," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203599, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc19:203599
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/203599/1/VfS-2019-pid-27906.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Daniel Verdier & Byungwon Woo, 2011. "Why Rewards Are Better Than Sanctions," Economics and Politics, Wiley Blackwell, vol. 23(2), pages 220-238, July.
    2. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    3. repec:ces:ifodic:v:13:y:2016:i:4:p:19189885 is not listed on IDEAS
    4. van Bergeijk, Peter A. G. & van Marrewijk, Charles, 1995. "Why do sanctions need time to work? Adjustment, learning and anticipation," Economic Modelling, Elsevier, vol. 12(2), pages 75-86, April.
    5. Jonathan Eaton & Maxim Engers, 1994. "Threats and Promises," Boston University - Institute for Economic Development 49, Boston University, Institute for Economic Development.
    6. Daniel Leithold, 2016. "Asylum in Europe," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(4), pages 55-58, 02.
    7. Tallberg, Jonas, 2002. "Paths to Compliance: Enforcement, Management, and the European Union," International Organization, Cambridge University Press, vol. 56(3), pages 609-643, July.
    8. Taehee Whang & Elena V. McLean & Douglas W. Kuberski, 2013. "Coercion, Information, and the Success of Sanction Threats," American Journal of Political Science, John Wiley & Sons, vol. 57(1), pages 65-81, January.
    9. Wagner, R. Harrison, 1988. "Economic interdependence, bargaining power, and political influence," International Organization, Cambridge University Press, vol. 42(3), pages 461-483, July.
    10. Eileen M. Crumm, 1995. "The Value of Economic Incentives in International Politics," Journal of Peace Research, Peace Research Institute Oslo, vol. 32(3), pages 313-330, August.
    11. George Tsebelis, 1990. "Are Sanctions Effective?," Journal of Conflict Resolution, Peace Science Society (International), vol. 34(1), pages 3-28, March.
    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. William Seitz & Alberto Zazzaro, 2020. "Sanctions and public opinion: The case of the Russia-Ukraine gas disputes," The Review of International Organizations, Springer, vol. 15(4), pages 817-843, October.
    2. Langlois Catherine C & Langlois Jean-Pierre P., 2010. "Costly Interference: A Game Theoretic Analysis of Sanctions," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 16(1), pages 1-34, June.
    3. David Lektzian & Mark Souva, 2007. "An Institutional Theory of Sanctions Onset and Success," Journal of Conflict Resolution, Peace Science Society (International), vol. 51(6), pages 848-871, December.
    4. Daniel Verdier, 2009. "Sanctions as revelation regimes," Review of Economic Design, Springer;Society for Economic Design, vol. 13(3), pages 251-278, September.
    5. 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.
    6. Menevis Cilizoglu & Navin A Bapat, 2020. "Economic coercion and the problem of sanctions-proofing," Conflict Management and Peace Science, Peace Science Society (International), vol. 37(4), pages 385-408, July.
    7. Demena, B.A. & Benalcazar Jativa, G. & Reta, A.S. & Kimararungu, P.B. & van Bergeijk, P.A.G., 2021. "Does research on economic sanctions suffer from publication bias?," ISS Working Papers - General Series 674, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    8. Seitz, William & Presbitero, Andrea & Zazzaro, Alberto, 2017. "Sanctions and public opinion : the case of the Russia-Ukraine gas disputes," IDE Discussion Papers 652, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    9. Janvier D. Nkurunziza, 2005. "Reputation and Credit without Collateral in Africa`s Formal Banking," Economics Series Working Papers WPS/2005-02, University of Oxford, Department of Economics.
    10. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    11. Peter-J. Jost, 2023. "Auditing versus monitoring and the role of commitment," Review of Accounting Studies, Springer, vol. 28(2), pages 463-496, June.
    12. Anne Corcos & Yorgos Rizopoulos, 2011. "Is prosocial behavior egocentric? The “invisible hand” of emotions," Post-Print halshs-01968213, HAL.
    13. Jack Hirshleifer & Eric Rasmusen, 1992. "Are Equilibrium Strategies Unaffected by Incentives?," Journal of Theoretical Politics, , vol. 4(3), pages 353-367, July.
    14. Dilmé, Francesc, 2019. "Dynamic quality signaling with hidden actions," Games and Economic Behavior, Elsevier, vol. 113(C), pages 116-136.
    15. Bagwell, Kyle & Wolinsky, Asher, 2002. "Game theory and industrial organization," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 3, chapter 49, pages 1851-1895, Elsevier.
    16. Pierpaolo Battigalli, 2006. "Rationalization In Signaling Games: Theory And Applications," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 67-93.
    17. Haltiwanger, John & Waldman, Michael, 1991. "Responders versus Non-responders: A New Perspective on Heterogeneity," Economic Journal, Royal Economic Society, vol. 101(408), pages 1085-1102, September.
    18. Carsten Hefeker & Michael Neugart, 2016. "Policy deviations, uncertainty, and the European Court of Justice," European Journal of Law and Economics, Springer, vol. 42(3), pages 547-567, December.
    19. Rafael Rob & Tadashi Sekiguchi, 2006. "Reputation and turnover," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 341-361, June.
    20. Kostas Kanellopoulos & Deniz Neriman Duru & Ulrike Zschache & Angelos Loukakis & Maria Kousis & Hans-Jörg Trenz, 2021. "Transnational Solidarity, Migration, and the Refugee Crisis: (In)Formal Organising and Political Environments in Greece, Germany, and Denmark," Sociological Research Online, , vol. 26(3), pages 717-738, September.

    More about this item

    Keywords

    Economic Statecraft; Rewards; Sanctions; International Relations; International Organisations; Incomplete Information; Uncertainty; Game Theory;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

    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:zbw:vfsc19:203599. 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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/vfsocea.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.