T his paper explores when and why private communication works in crisis diplomacy. Conventional audience-cost models suggest that state leaders must go public with their threats in international crises because leaders cannot tie their hands if signals are issued privately. I present a crisis bargaining game where both the sender and the receiver of signals have a domestic audience. The equilibrium analysis demonstrates that a private threat, albeit of limited credibility, can be equally compelling as a fully credible public threat. The analysis suggests that secrecy works in crisis diplomacy despite its informational inefficacy. Secrecy insulates leaders from domestic political consequences when they capitulate to a challenge to avoid risking unwarranted war. The logic of efficient secrecy helps shed light on the unaccounted history of private diplomacy in international crises. The Alaska Boundary Dispute illustrates this logic.Secrecy is the very soul of diplomacy.--François de Callières, 1716
Selection effects in crisis bargaining make it difficult to directly measure audience costs because state leaders have an incentive to avoid incurring audience costs. We overcome this inferential problem of selection bias by using a structural statistical model. This approach allows us to estimate the size of audience costs, both incurred and not incurred, in international crises. We show that although audience costs exist for state leaders of various regime types, democratic leaders face larger audience costs than nondemocratic leaders do. Audience costs can be so large that war might be preferable to concessions, especially for leaders of highly democratic states. Audience costs also increase a state's bargaining leverage in crises because the target state is more likely to acquiesce if the challenge carries larger audience costs. We also find evidence that audience costs generate selection effects.Detecting the existence and effect of "audience costs" has been a fundamental quest in the study of international relations since Fearon proposed the audience cost (AC) model. 1 The AC model provides a coherent answer to several key questions in the field. It explains why state leaders can rationally go to war even if war is inefficient, why state leaders go public and provoke dramatic confrontations in communicating resolve, and why coercive threats are rare. 2 In addition, an auxiliary hypothesisaudience costs are higher in democracies than in nondemocracies-allows scholars to explain why political institutions affect state leaders' ability to send signals and make commitments in a wide range of issues beyond military crises. 3
As passive investment through index funds and Exchange Traded Funds (ETFs) has become pervasive, the structure of corporate control in the global capital market is more complex than before. We propose a new model and calculation algorithm to measure a shareholder's power to control corporations in the global economy. Our method takes into account how fragmented voting rights attached to dispersed ownership may be consolidated to generate corporate control. Analyzing the ownership holdings in 49 million companies worldwide by 69 million shareholders in 2016, we find that the landscape of global corporate control appears differently if we adequately evaluate indirect influence via dispersed ownership. In particular, a larger portion of corporate control appears to be concentrated in the hands of sovereign governments than has been recognized before. Yet, such governmental capacities are "hidden" if we use the conventional method. Moreover, financial institutions appear to not be as powerful as emphasized before. These results point to important financial and political risks both for scholars and policymakers.
Why has North Korea been able to survive up to now, while other rogue states such as Afghanistan and Iraq have suffered military intervention by the USA? To solve this puzzle, we present a simple two-level game model that takes into account strategic interdependence between intrastate and interstate wars. Using the two-level game framework, we show that the ethnic homogeneity of North Korea helps defend itself from US armed intervention, whereas a rogue state with a relatively heterogeneous society is expected to experience international insecurity by providing the USA with an opportunity to find domestic allies that help it win an interstate war against the rogue state. As a policy implication, we discuss the possibility that the recent development of a market economy in North Korea might destabilize the peace between the USA and North Korea.
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