Institute of Economic Research, Seoul National University
Abstract
This paper considers a simple model of zero-sum conflict between
two players ( e.g., territorial dispute) in which costly actions ( e.g.,
terrorism) are available to one side. We identify how reputation
effects shape the outcome of such conflict. A small prior of fanatic
commitment type induces the possibility of costly attack followed by
withdrawal in equilibrium. The chance of withdrawal is proportional
to the self-inflicted cost of attack.This work was supported by the Je-Won
Research Foundation Grant funded via the Institute of Economic Research at
Seoul National University
