Citation

Ploeg F, Zeeuw AJ. Int. Econ. Rev. 1990; 31(1): 131-146.

Copyright

(Copyright © 1990, Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association, Publisher John Wiley and Sons)

DOI

10.2307/2526633

PMID

unavailable

Abstract

This paper shows that the subgame-perfect Nash strategic equilibrium, which is relevant when countries can monitor their rival's weapon stock, leads to lower levels of arms and higher welfare than the standard open-loop Nash strategic equilibrium for an arms race. This result is derived for a model of competitive arms accumulation, in which two countries face a classic "guns versus butter" dilemma in the form of utilities which depend on consumption, leisure and the characteristic defence. Moreover, it is argued that the perfect equilibrium strategies lead to a more satisfactory strategic underpinning of the well-known Richardson equations.