Hörner, Johannes, Morelli, Massimo and Squintani, Francesco (2015) Mediation and peace. The Review of Economic Studies, 82 (4). pp. 1483-1501. doi:10.1093/restud/rdv022

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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.

Item Type:	Journal Article
Divisions:	Faculty of Social Sciences > Economics
Journal or Publication Title:	The Review of Economic Studies
Publisher:	Oxford University Press
ISSN:	0034-6527
Official Date:	October 2015
Dates:	Date Event October 2015 Published 15 May 2015 Available March 2015 Accepted
Volume:	82
Number:	4
Page Range:	pp. 1483-1501
DOI:	10.1093/restud/rdv022
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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