Forward Induction in Arms Races

Abstract:     
I investigate a two-country non cooperative game where the status quo ante is asymmetric as one country is endowed with nuclear weapons while the other is not and is evaluating the opportunity of build up a nuclear arsenal. After identifying the conditions on payoffs such that the resulting reduced form is a coordination game with two symmetric equilibria, I resort to forward induction to show that the implicit signaling mechanism in it may lead countries to select the peaceful equilibrium in a symmetric environment where both are endowed with analogous arsenals.

Number of Pages in PDF File: 12

Keywords: arms race, wargames, escalation

JEL Classification: C72, F50

working papers series