Rational Appeasement

Topics: Game theory, Nash equilibrium, Trembling hand perfect equilibrium Pages: 42 (15284 words) Published: April 4, 2010
Rational Appeasement
Daniel Treisman

Abstract Since Munich, appeasement—a policy of making unilateral concessions in the hope of avoiding conflict—has been considered a disastrous strategy+ Conceding to one adversary is thought to undermine the conceder’s reputation for resolve, provoking additional challenges+ Kreps, Wilson, Milgrom, and Roberts formalized this logic in their 1982 solutions to the “chain-store paradox+” I show with a series of models that if a state faces multiple challenges and has limited resources, the presumption against appeasement breaks down: appeasing in one arena may then be vital to conserve sufficient resources to deter in others+ I identify “appeasement” and “deterrence” equilibria, and I show that when the stakes of conflict are either high or low, or when the costs of fighting are high, only appeasement equilibria exist+ I illustrate the result with discussions of successful appeasement by Imperial Britain and unsuccessful attempts at reputation-building by Spain under Philip IV+

Appeasement has few defenders+ Ever since Neville Chamberlain’s famous piece of paper failed to stop the Nazi advances in the 1930s, making concessions to an aggressor in the hope of preventing war has seemed to most observers rather foolish+ Winston Churchill ridiculed appeasement as the strategy of “one who feeds a crocodile, hoping it will eat him last+” 1 Reasons for distrusting the policy were, in fact, noticed long before Munich+ Classical political thinkers from Thucydides to Machiavelli offer many statements of the anti-appeasement view+ Appeasement, many argue, is not just futile: it is self-destructive+ The danger is most acute when many potential challengers exist+ Acceding to one challenger undermines the appeaser’s reputation for resolve and encourages others to attack, starting a cascade of dominoes+ The argument received a compelling game theoretic formulation in the solutions of Kreps and Wilson and Milgrom and Roberts to Reinhard Selten’s “chain-store paradox+” 2 This article argues that the common presumption against appeasement is far too strong+ The standard treatments leave out one factor that is crucial in international

I thank Rui de Figueiredo, Jim Fearon, Tim Groseclose, David Laitin, Ed Mansfield, James Morrow, Barry O’Neill, Bob Powell, Lawrence Saez, Ken Schultz, Art Stein, Marc Trachtenberg, Romain Wacziarg, Justin Wolfers, and other participants in seminars at the University of California, Berkeley, Stanford University, and the 2002 American Political Science Association meeting for helpful comments+ 1+ Comfort 1993, 20+ 2+ See Kreps and Wilson 1982; and Milgrom and Roberts 1982+ International Organization 58, Spring 2004, pp+ 345–373 © 2004 by The IO Foundation+

DOI: 10+10170S002081830458205X

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International Organization

politics—resource constraints+ If resources are limited and a state faces many potential threats, appeasing one challenger may actually increase a state’s ability to deter others+ When conflict is costly, defenders face a trade-off: fighting may enhance their reputation for resolve, but it will deplete their resources to fight—or deter—future challenges+3 Often, the latter effect outweighs the former, prompting a strategy I call “rational appeasement+” If even highly resolved incumbents rationally appease, observers do not impute low resolve to appeasers+ Moreover, when fighting depletes enforcement resources, a refusal to appease can undermine the state’s deterrent+ This insight applies to actors as diverse as states facing international challenges, empires fearing subject rebellions, 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! à la Kreps and Wilson...

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