The Inefficient Use of Power: Costly Conflict with Complete Information

Abstract

R ecent work across a wide range of issues in political economy as well as in American, comparative, and international politics tries to explain the inefficient use of power-revolutions, civil wars, high levels of public debt, international conflict, and costly policy insulation-in terms of commitment problems. This paper shows that a common mechanism is at work in a number of these diverse studies. This common mechanism provides a more general formulation of a type of commitment problem that can arise in many different substantive settings. The present analysis then formalizes this mechanism as an "inefficiency condition" that ensures that all of the equilibria of a stochastic game are inefficient. This condition has a natural substantive interpretation: Large, rapid changes in the actors' relative power (measured in terms of their minmax payoffs) may cause inefficiency.

Military Coercion in Interstate Crises

“…Hence, the model does not speak to the inefficiency puzzle with complete information (Fearon 1995;Powell 2004). Rather, it provides a rationale for taking the military instrument seriously.…”

Union Density and Political Strikes

“…Before moving on to empirical matters, I would like to discuss in brief how the argument presented here relates to earlier studies that have found nonlinear relationships among variables related to the 13 Faniel 2005. 14 See, for example, Fearon 1995;Powell 2004;and Acemoglu and Robinson 2006. 15 Fearon 1995, 406.…”

Dynamic stability and reform of political institutions

“…Though the following are not models of endogenous institutions per se, Powell (2004), Egorov and Sonin (2005), and Gomes and Jehiel (2005) all construct interesting dynamic games in this spirit. Powell constructs a dynamic game in which a temporarily weak government may lack credibility to induce another government to restrain its inefficient use of power such as launching a coup or attacking.…”