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Unformatted text preview: lions, federations concerned about ¶ possible regional tax revolts, and monopolists eager to deter entry.¶ Below, I demonstrate this point formally. First I present a benchmark model of ¶ the interaction between one "central" and two "local" actors assuming no resource¶ constraint, and I show how investing in reputation can be rational (and appeasement ¶ irrational) a la Kreps and Wilson and Milgrom and Roberts. I show that a¶ deterrence equilibrium will often exist in which "weak" central actors fight to preserve¶ a reputation for "strength." I then show how the logic changes if the central ¶ actor's resources are limited. Now APPEASEMENT DISADVANTAGE
7-WEEK JUNIORS MICHIGAN 2013
CFJPV ighting the first challenger to demonstrate resolve f ¶ is often selfdestructive: it weakens the center so much that this actually ¶ prompts the second to attack. The conditions for this depend on whether the stakes ¶ of conflict can be manipulated by the center or are exogenous. If they are exogenous,¶ fighting is selfdestructive when the stakes are either high or low; if endogenous, ¶...
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- Summer '12