Endogenous elites: power structure and patron-client relationships

In weak institutional settings, autocrats barter political and economic concessions for support to remain in power and extract rents. Instead of viewing the favors’ beneficiaries, i.e. the elites, as an exogenous entity, we allow the king to decide whom to coopt provided the subjects are heterogeneous in the potential support—their strength—they could bring to the regime. While the ruler can select the elites on the basis of their personal characteristics, an alternative strategy consists in introducing some uncertainty in the cooptation process. The latter strategy allows the king to reduce the clients’ cooptation price since in the event of a revolution the likelihood of being included in the future body of elites is lower. We show that weak rulers are more likely to coopt the society’s strongest individuals, while powerful rulers diversify the composition of their clientele. Moreover, when agents value more future discounted outcomes, the king is more likely to randomly coopt subjects.     

The tragedy of the commons in a violent world

Earlier research has shown that the tragedy of the commons may be resolved by Folk theorems for dynamic games. In this article, we graft on a standard natural‐resource exploitation game the possibility to appropriate the resource through violent means. Because conflict emerges endogenously as resources get depleted, the threat supporting the cooperative outcome is no longer subgame perfect, and thus credible. The unique equilibrium is such that players exploit noncooperatively the resource when it is abundant, and they revert to conflict when it becomes scarce. The players' utility is shown to be lower even if conflict wastes no resources.     

US Security Strategy and the Gains from Bilateral Trade

We explore the geo‐strategic determinants of bilateral trade flows between the USA and the rest of the world. We develop a three‐party model of security and trade patterns and use data on military assistance and troop deployments over the 1950–2009 period to validate its predictions. We find that security assistance has significant, positive impacts on the shares of bilateral trade between the USA and the recipient country, results that are robust to issues of reverse causality and hold across different sectors.     

Payoff-Improving Competition: Games with Negative Externalities

We demonstrate that more intense competition in games with production and negative externalities may be payoff-improving, and therefore welcomed by incumbents. In games that feature equilibria with strategic complements, increased competition may give rise to a new equilibrium where aggregate effort is lower, and the resulting reduced levels of externalities ultimately leaves all players better off. This setting applies to models of Cournot oligopoly, of common pool resources, and contests with endogenous prizes.

     

Politics and Insurgencies

The article provides an analytical approach to capturing the population‐centric view of insurgency and allows for the inclusion of politics in describing its earliest stages. The outcome of the politico‐military contest over population support now becomes not only a function of the proposed governing policies of the two contestants, the government and insurgents, but also a function of such factors as the sensitivity of the population to the proposed policies and efforts of the two parties, the effectiveness of their mobilization efforts, and the strategic value of the region to insurgents. We also look at two different scenarios in which the government can and cannot mobilize against the insurgency and establish conditions in which a government may actually choose not to mobilize against a possible domestic threat. We also determine conditions under which insurgents may engage in less rent extraction than the government in order to increase their chances of gaining population support.     

Competition and Strategic Budget Choices in the Motion Picture Industry*

In this article, we study the effect of differentiation on firms' optimal investments in advertising and product quality in the specific context of the motion picture industry. To guide our empirical analysis, we develop a stylized model uncovering that competition in advertising is the highest for intermediate levels of horizontal differentiation, while product quality increases monotonically in differentiation. We corroborate our theoretical predictions with a large dataset on the movie industry confirming both the inverted U-shaped relationship between advertising and differentiation, and the monotonically increasing relationship between product quality and differentiation.