Fortune Favours the Bold: An Agent-Based Model Reveals Adaptive Advantages of Overconfidence in War

Overconfidence has long been considered a cause of war. Like other decision-making biases, overconfidence seems detrimental because it increases the frequency and costs of fighting. However, evolutionary biologists have proposed that overconfidence may also confer adaptive advantages: increasing ambition, resolve, persistence, bluffing opponents, and winning net payoffs from risky opportunities despite occasional failures. We report the results of an agent-based model of inter-state conflict, which allows us to evaluate the performance of different strategies in competition with each other. Counter-intuitively, we find that overconfident states predominate in the population at the expense of unbiased or underconfident states. Overconfident states win because: (1) they are more likely to accumulate resources from frequent attempts at conquest; (2) they are more likely to gang up on weak states, forcing victims to split their defences; and (3) when the decision threshold for attacking requires an overwhelming asymmetry of power, unbiased and underconfident states shirk many conflicts they are actually likely to win. These “adaptive advantages” of overconfidence may, via selection effects, learning, or evolved psychology, have spread and become entrenched among modern states, organizations and decision-makers. This would help to explain the frequent association of overconfidence and war, even if it no longer brings benefits today

Borrowed power: Debt finance and the resort to arms

Military expenditures are often funded by debt, and sovereign borrowers are more likely to renege on debt-service obligations if they lose a war than if they win one or if peace prevails. This makes expected debt service costlier in peace, which can affect both crisis bargaining and war termination. I analyze a complete-information model where players negotiate in the shadow of power, whose distribution depends on their mobilization levels, which can be funded partially by borrowing. I show that players can incur debts that are unsustainable in peace because the opponent is unwilling to grant the concessions necessary to service them without fighting. This explanation for war is not driven by commitment problems or informational asymmetries but by the debt-induced inefficiency of peace relative to war. War results from actions that eliminate the bargaining range rather than from inability to locate mutually acceptable deals in that range. © 2012 American Political Science Association

Borrowed power: Debt finance and the resort to arms

Military expenditures are often funded by debt, and sovereign borrowers are more likely to renege on debt-service obligations if they lose a war than if they win one or if peace prevails. This makes expected debt service costlier in peace, which can affect both crisis bargaining and war termination. I analyze a complete-information model where players negotiate in the shadow of power, whose distribution depends on their mobilization levels, which can be funded partially by borrowing. I show that players can incur debts that are unsustainable in peace because the opponent is unwilling to grant the concessions necessary to service them without fighting. This explanation for war is not driven by commitment problems or informational asymmetries but by the debt-induced inefficiency of peace relative to war. War results from actions that eliminate the bargaining range rather than from inability to locate mutually acceptable deals in that range. © 2012 American Political Science Association

Military coercion in interstate crises

Military mobilization simultaneously sinks costs, because it must be paid for regardless of the outcome, and ties hands, because it increases the probability of winning should war occur. Existing studies neglect this dualism and cannot explain signaling behavior and tacit bargaining well. I present a formal model that incorporates both functions and shows that many existing conclusions about crisis escalation have to be qualified. Contrary to models with either pure sunk costs or tying-hands signaling, bluffing is possible in equilibrium. General monotonicity results that relate the probability of war to an informed player's expected payoff from fighting do not extend to this environment with its endogenous distribution of power. Peace may involve higher military allocations than war. Rational deterrence models also assume that a commitment either does or does not exist. Extending these, I show how the military instrument can create commitments and investigate the difficulties with communicating them

The Principle of Convergence in Wartime Negotiations

If war results from disagreement about relative strength, then it ends when opponents learn enough about each other. Learning occurs when information is revealed by strategically manipulable negotiation behavior and nonmanipulable battlefield outcomes. I present a model of simultaneous bargaining and fighting where both players can make offers and asymmetric information exists about the distribution of power. In the Markov perfect sequential equilibrium, making and rejecting offers has informational value that outweighs the one provided by the battlefield. However, states use both sources of information to learn and settle before military victory. The Principle of Convergence posits that warfare ceases to be useful when it loses its informational content and that belief in defeat (victory) is not necessary to terminate (initiate) hostilities. Thus, the standard puzzle in international relations that seeks to account for prewar optimism on both sides may not be that relevant

The Principle of Convergence in Wartime Negotiations

If war results from disagreement about relative strength, then it ends when opponents learn enough about each other. Learning occurs when information is revealed by strategically manipulable negotiation behavior and nonmanipulable battlefield outcomes. I present a model of simultaneous bargaining and fighting where both players can make offers and asymmetric information exists about the distribution of power. In the Markov perfect sequential equilibrium, making and rejecting offers has informational value that outweighs the one provided by the battlefield. However, states use both sources of information to learn and settle before military victory. The Principle of Convergence posits that warfare ceases to be useful when it loses its informational content and that belief in defeat (victory) is not necessary to terminate (initiate) hostilities. Thus, the standard puzzle in international relations that seeks to account for prewar optimism on both sides may not be that relevant

How initiators end their wars: The duration of warfare and the terms of peace

The new theories of endogenous war termination generally predict that initiators would tend to do badly the longer the war, that information acquired during the war would outweigh information available prior to its outbreak, that stronger initiators would be slower to update their estimates about the outcome, and that uncertainty would increase the expected duration of conflict. This article subjects these hypotheses to statistical testing by estimating time-accelerated log-logistic hazard models of duration and bootstrapped ordered probit models of outcome with a new data set of 104 interstate wars from 1816 to 1991. The Monte Carlo simulation results support the hypotheses and the substantive findings provide ample reason for continuing with this research agenda

The political economy of simultaneous transitions: An empirical test of two models

Traditional political economy emphasizes the difficulty of conducting simultaneous transitions toward market economy and democratic government. There are two major theories that seek to explain why some reform programs are never fully implemented or are reversed shortly after their inception. The J-Curve model (JCM) (Przeworski 1993) implicates the short-term losers from reform as the major opposition, and the Partial Reform Equilibrium model (PREM) (Hellman 1998) implicates the winners. I subject the models to empirical analysis with data from 25 post-communist countries and find that the data do not support the contention of the JCM. High unemployment rates do not threaten the survival of reform programs, and government instability does not necessarily translate into bad economic policies. These results suggest that the common concern that socially costly economic reforms endanger the consolidation of democratic norms may be misplaced

Military coercion in interstate crises

Military mobilization simultaneously sinks costs, because it must be paid for regardless of the outcome, and ties hands, because it increases the probability of winning should war occur. Existing studies neglect this dualism and cannot explain signaling behavior and tacit bargaining well. I present a formal model that incorporates both functions and shows that many existing conclusions about crisis escalation have to be qualified. Contrary to models with either pure sunk costs or tying-hands signaling, bluffing is possible in equilibrium. General monotonicity results that relate the probability of war to an informed player's expected payoff from fighting do not extend to this environment with its endogenous distribution of power. Peace may involve higher military allocations than war. Rational deterrence models also assume that a commitment either does or does not exist. Extending these, I show how the military instrument can create commitments and investigate the difficulties with communicating them