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A Game-Free Microfoundation of Mutual Optimism

Max Planck Institute for Tax Law and Public Finance, Department of Public Economics, Marstallplatz 1, D-80539 München, Germany
Games 2019, 10(4), 37;
Received: 11 July 2019 / Revised: 21 September 2019 / Accepted: 25 September 2019 / Published: 27 September 2019
(This article belongs to the Special Issue Political Games: Strategy, Persuasion, and Learning)
One of the most widely accepted explanations for why wars occur despite its Pareto-suboptimality is mutual optimism: if both sides expect to gain a lot by fighting, war becomes inevitable. The literature on mutual optimism typically assumes mutually optimistic beliefs and shows that, under such an assumption, war may occur despite its Pareto-suboptimality. In a war–peace model, we show that, if players neglect the correlation between other players’ actions and their types—a well-established concept in economics—then players’ expected payoffs from war increase relative to conventional informational sophistication predictions, hence providing a microfoundation of mutual optimism. View Full-Text
Keywords: mutual optimism; incentives to go to war; information; correlation neglect mutual optimism; incentives to go to war; information; correlation neglect
MDPI and ACS Style

Serena, M. A Game-Free Microfoundation of Mutual Optimism. Games 2019, 10, 37.

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