Abstract
This article applies mechanism design to the study of international conflict resolution. Standard mechanisms in which an arbitrator can enforce her decisions are usually not feasible because disputants are sovereign entities. Nevertheless, we find that this limitation is inconsequential. Despite only being capable of making unenforceable recommendations, mediators can be equally effective as arbitrators. By using recommendation strategies that do not reveal that one player is weak to a strong opponent, a mediator can effectively circumvent the unenforceability constraint. This is because these strategies make the strong player agree to recommendations that yield the same payoff as arbitration in expectation. This result relies on the capability of mediators to collect confidential information from the disputants, before making their recommendations. Simple protocols of unmediated communication cannot achieve the same level of ex ante welfare, as they preclude confidentiality.
Keywords
mediation; arbitration; cheap talk; mechanism design; conflict;
JEL codes
- C72: Noncooperative Games
- C73: Stochastic and Dynamic Games • Evolutionary Games • Repeated Games
- D82: Asymmetric and Private Information • Mechanism Design
Reference
Johannes Hörner, Massimo Morelli, and Francesco Squintani, “Mediation and Peace”, The Review of Economic Studies, vol. 82, 2015, pp. 1483–1501.
Published in
The Review of Economic Studies, vol. 82, 2015, pp. 1483–1501