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Strategic Demands and Economic Coercion

Strategic Demands and Economic Coercion. Valentin Krustev Rice University. Motivation Many sanctions theories look at the strategic interaction between senders and targets But the sender’s demand is treated as exogenous to that interaction – Does the sender form its demand strategically?

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Strategic Demands and Economic Coercion

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  1. Strategic Demands and Economic Coercion Valentin Krustev Rice University

  2. Motivation • Many sanctions theories look at the strategic interaction between senders and targets • But the sender’s demand is treated as exogenous to that interaction – • Does the sender form its demand strategically? Null Hypotheses • The sanctions demand is exogenous • Sanctions serve symbolic/domestic purposes • Sanctions arise from concerns over relative gains

  3. Premises • The sender can choose whether to make a demand • The sender can also choose how much to demand • The sender is uncertain of its success prospects (Theoretical) Conclusions • The sender conditions its demand on its expectations • Stronger senders do not always win more often because they also demand more • Stronger senders are more likely to make a demand in the first place

  4. Modeling Economic Coercion • Bargaining situation • For any policy outcome, both sides prefer no sanctions over sanctions • However, they have conflicting preferences over the possible policy outcomes • Relative sanctions costs should determine outcome • However, sender is uncertain about the target’s type • Inefficient outcomes possible

  5. Perfect Bayesian Equilibrium

  6. Perfect Bayesian Equilibrium

  7. Empirical Implications • In any equilibrium, improving the sender’s position (lower sender costs, higher credibility, higher p), improves its success chances • However, improving the sender’s position eventually shifts the game into a higher-demand equilibrium, which worsens success chances despite higher expected coercion payoff (=demand should vary with exogenous vars) • In high-demand equilibria it is easier for the expected coercion payoff to exceed the sender’s reservation utility (=positive selectivity into high-demand cases)

  8. success probability demand demand expected payoff p

  9. success probability demand demand expected payoff w p

  10. Ideal Estimation

  11. Estimation At This Time

  12. Preliminary Results (TIES)

  13. Conclusion • The theoretical model has identified empirical patterns which we should be likely to observe if states make strategic decisions to engage in economic coercion and what to demand • No conclusive evidence (yet) regarding the endogeneity/exogeneity of the sanctions demand

  14. Questions & Comments

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