Estimating State Preference in International Crises: An Application

Question: What are the sources of state preferences in international crises? Challenge: Preferences are unobserved, so we need to infer them from observed choices In a strategic setting, the mapping between preferences and choices is complicated by (a) interdependence and (b) uncertainty Motivation

A B A Challenge Not Challenge Resist Not Resist Fight Not Fight SQ SQ A, SQ B ACQ ACQ A, ACQ B BD BD A, BD B SF SF A, SF B The Crisis Bargaining Game Information Structure: B does not know SF A and BD A A does not know SF B All other payoffs common knowledge

A B A Challenge Not Challenge Resist Not Resist Fight Not Fight From Theoretical to Empirical Model Information Structure:  SF A,  BD A,  SF B ~N(0,1) A observes  SF A,  BD A B observes  SF B X common knowledge

The Equilibrium Probabilities Outcome Probabilities:

Normalizations/Constraints 1.Normalize SQ A and BD B to have zero mean by demeaning the covariates and including no constants in these expressions. 2.Constrain the constant in ACQ A to be greater than zero, and the constant in ACQ B to be less than zero. This ensures that, on average, ACQ A > SQ A and ACQ B < BD B i.e., the “good” is actually a good.

Why Do This? 1.Captures the strategic nature of choices and the role of asymmetric information in a crisis interactions. 2.Strategic interaction can lead to non-monotonic relationships and other oddities that are not easy to capture in linear models. 3.Allows us to estimate the effects of covariates on specific payoffs, rather than on outcomes.

A Possible Non-Monotonic Effect

The Pitfalls of Standard Practice Schultz, “Do Democratic Institutions Constrain or Inform?” (1999 International Organization): Theoretical Prediction: If democracy decreases W A, then democracy in A should increase the probability that B resists. If democracy decreases BD A, then democracy in A should decrease the probability that B resists. Empirical Result: Democratic initiators face lower probability of reciprocation in militarized disputes. Conclusion: Democracy decreases BD A.

But… A correlation between democracy in A and an increased probability of ACQ by B can be the product of more than one thing: Equilibrium Probability of the ACQ Outcome WAWA WBWB BD A

Caveat Emptor 1.Do we believe that this stylized, theoretical model actually generated the data? 2.Data demands Data need to reflect game outcomes The SQ problem Large number of observations are needed to avoid empirical under-identification

The Data Cases drawn from –International Crisis Behavior (ICB) –Militarized Interstate Dispute (MID) Definition of Challenge: –“Any act that is made deliberately by a central state authority with the intent of altering the pre-crisis relationship between itself and at least one other state and that is backed by the threat of military force. The threat of force may take the form of a diplomatic ultimatum, a show of force, or a limited use of force.” For each case, we identify –State A (Challenger) –State B (Target) –Outcome (SQ, ACQ, BD, SF)

The Data In the period , we identified 93 dyadic challenges. Outcome distribution: OutcomeICBMIDTotal ACQ BD5712 SF33437

The Status Quo Problem What is the correct population of SQ cases? –We can only be sure that a play of the game took place if the outcome is not SQ. –How often do crisis opportunities arise? We generated 4188 SQ observations meeting the following criteria: –No challenge occurred in a three-year period –The dyad consisted of Contiguous states, or major powers with other major powers and states in their geographic region. –For each dyad that met this criterion, there are two observations, since each state has a turn to be the challenger. These observations were given weight ½.

Empirical Under-Identification Even if a parameter is theoretically identified, it may be hard in practice to distinguish the effects of two parameters that have similar effect on behavior in the game.