Credibility and Reputationin Peacemaking

The paper analyses credibility and reputation in the context of peace negotiations. Where war provides economic gains to one side, peace is not incentive compatible, and peace agreements will necessarily degenerate, as they become time inconsistent. Levels of conflict are an increasing function of greed and rents, but decreasing in the direct costs of war. In a multiple period framework there is some uncertainty regarding the type of negotiator and for high values of the discount rate more conflict is chosen. Sanctions, aid and direct intervention, if effective, could eliminate conflict, as well as help in devising commitment technologies. [DiscussionPaperNo.2001/45]