Conflict expectations and the paradox of economic coercion

Abstract

Despite their increasing importance, there is little theoretical understanding of why nation-states initiate economic sanctions or what determines their success. These events are often explained away as 'symbolic politics' driven completely by domestic-level factors. This article develops a simple game-theoretic model of economic coercion to show that both 'senders' and 'targets' of economic coercion incorporate expectations of future conflict as well as the short-run opportunity costs of coercion into their behavior. Conflict expectations have a paradoxical effect on coercion events. First, senders that anticipate frequent conflicts will be more willing to initiate economic coercion, even if such attempts are costly. Senders that anticipate few conflicts will not threaten sanctions unless they incur minimal costs and the target would suffer significantly. While a robust anticipation of future disputes might make the sender prefer a coercive strategy, it also reduces its ability to obtain concessions. Target states that anticipate frequent conflict with the sender will make fewer concessions. Ironically, a sender will obtain the most favorable distribution of payoffs when it cares the least about its reputation or the distribution of gains. These hypotheses are tested statistically, with the results strongly supporting the conflict expectations model.