Publication Type
Working Paper
Version
publishedVersion
Publication Date
1-2015
Abstract
We present a prospect theory model to explain why power transitions do not necessarily lead to war. We find that three major mechanisms prevent the occurrence of potential power transition wars. First, the dual boiling frog effects occurring in the middle range of capability catching-up rate prevent a dominant state from preempting and a rising state from challenging the other side. Second, divergent expectations for favorable comparative growth advantage motivate both parties to keep the status quo. Third, the concerns of relative advantage deterioration over a third party in the post-war power structure help deter both parties from starting a war.
Keywords
Power Transition, Dual Boiling Frog Effects, Expectation Divergence, Relative Advantage Deterioration
Discipline
Behavioral Economics
Research Areas
Macroeconomics
First Page
1
Last Page
17
Citation
WANG, Huan and ZHANG, Yi.
A Prospect Theory of Power Transition: Why Power Transition Does Not Imply War?. (2015). 1-17.
Available at: https://ink.library.smu.edu.sg/soe_research/1711
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.