Detecting Audience Costs in International Disputes & Informational Effects of Audience Costs Shuhei Kurizaki 1 Taehee Whang 2 1 School of Political Science and Economics Waseda University 2 Division of International Studies Korea University January 8, 2014 The University of Tokyo
Introduction What explains the origin of war?
Introduction What explains the origin of war? One prominent explanation is the “audience costs” model:
Introduction What explains the origin of war? One prominent explanation is the “audience costs” model: A leader who backs down in an international crisis suffers audience costs of some form. Figure: Fearon (1994)
Introduction What explains the origin of war? One prominent explanation is the “audience costs” model: A leader who backs down in an international crisis suffers audience costs of some form. Figure: Fearon (1994) Audience costs make a decision to go to war rational.
Introduction What explains the origin of war? One prominent explanation is the “audience costs” model: A leader who backs down in an international crisis suffers audience costs of some form. Figure: Fearon (1994) Audience costs make a decision to go to war rational. A conjecture –audience costs are higher in democracies– led to massive applications
Audience costs: Problem Very controversial because ACs are only assumed to exist.
Audience costs: Problem Very controversial because ACs are only assumed to exist. 1 Theory: No consensus yet on the microfoundaiton.
Audience costs: Problem Very controversial because ACs are only assumed to exist. 1 Theory: No consensus yet on the microfoundaiton. 2 Empirics: None has presented definitive evidence.
In this paper We establish an empirical foundation of the AC model: 1 Direct evidence of the existence of audience costs.
In this paper We establish an empirical foundation of the AC model: 1 Direct evidence of the existence of audience costs. 2 Test common conjectures about audience costs:
In this paper We establish an empirical foundation of the AC model: 1 Direct evidence of the existence of audience costs. 2 Test common conjectures about audience costs: Audience costs ∝ democracy
In this paper We establish an empirical foundation of the AC model: 1 Direct evidence of the existence of audience costs. 2 Test common conjectures about audience costs: Audience costs ∝ democracy Audience costs ≥ war costs
In this paper We establish an empirical foundation of the AC model: 1 Direct evidence of the existence of audience costs. 2 Test common conjectures about audience costs: Audience costs ∝ democracy Audience costs ≥ war costs Audience costs → bargaining power
In this paper We establish an empirical foundation of the AC model: 1 Direct evidence of the existence of audience costs. 2 Test common conjectures about audience costs: Audience costs ∝ democracy Audience costs ≥ war costs Audience costs → bargaining power 3 Test the causal mechanism of the AC model:
In this paper We establish an empirical foundation of the AC model: 1 Direct evidence of the existence of audience costs. 2 Test common conjectures about audience costs: Audience costs ∝ democracy Audience costs ≥ war costs Audience costs → bargaining power 3 Test the causal mechanism of the AC model: Audience costs → effective signaling/belief updating
Audience Cost Model 1 Inference Problems 2 Research Strategy 3 Statistical Model of Audience Costs 4 Results 5 Existence of Audience Costs Magnitude of Audience Costs Effects of Audience Costs Causal Mechanism of Audience Costs
Audience Cost Model 1 Inference Problems 2 Research Strategy 3 Statistical Model of Audience Costs 4 Results 5 Existence of Audience Costs Magnitude of Audience Costs Effects of Audience Costs Causal Mechanism of Audience Costs
� � � � � � � � � � A Common AC Model and Selection Effects State 1 State 2 State 1 Resist Fight Challenge Stand Firm u ( SF ) w ~Challenge ~Resist ~Fight 1 1 u ( SF ) w 1 2 Status Quo Concession Back Down u ( SQ ) 0 u ( CD ) 1 u ( BD ) a 1 1 1 1 u ( SQ ) 1 u ( CD ) a u ( BD ) 1 1 2 2 2 Definition Audience costs for State 1 exist iff u 1 ( BD ) < u 1 ( SQ )
A Common AC Model and Selection Effect Unique Equilibrium Pooling equilibrium if ˆ a 1 ≤ a 1 < ˜ a 1 Semi-pooling equilibrium if ˜ a 1 ≤ a 1 < a 1 Separating equilibrium if a 1 ≥ a 1 Equilibrium and AC
A Common AC Model and Selection Effect Unique Equilibrium Pooling equilibrium if ˆ a 1 ≤ a 1 < ˜ a 1 Semi-pooling equilibrium if ˜ a 1 ≤ a 1 < a 1 Separating equilibrium if a 1 ≥ a 1 Equilibrium and AC Equilibrium behavior/outcome is shaped by AC
A Common AC Model and Selection Effect Unique Equilibrium Pooling equilibrium if ˆ a 1 ≤ a 1 < ˜ a 1 Semi-pooling equilibrium if ˜ a 1 ≤ a 1 < a 1 Separating equilibrium if a 1 ≥ a 1 Equilibrium and AC Equilibrium behavior/outcome is shaped by AC Equilibrium selects type (size) of observable AC
Audience Cost Model and Selection Effects 1 1 1 Pr ( CH ) Pr ( BD ) Pr ( RS ) a 1 a 1 a 1 0 ~ 0 ~ 0 ~ ˆ ˆ ˆ a a a a a a a a a 1 1 1 1 1 1 1 1 1 (a) First Selection Stage: (b) Second Selection Stage: (c) Third Selection Stage: State 1 State 2 State 1 Resist Fight Challenge Stand Firm ~Challenge ~Resist ~Fight Status Quo Concession Back Down
Inference Problems Selection bias Distribution of observable AC is truncated on the right. Inferring audience costs
Inference Problems Selection bias Distribution of observable AC is truncated on the right. Inferring audience costs Must observe audience costs, both incurred and not incurred.
Inference Problems Selection bias Distribution of observable AC is truncated on the right. Inferring audience costs Must observe audience costs, both incurred and not incurred. Must observe audience costs both on and off the equilibrium path.
Inference Problems Selection bias Distribution of observable AC is truncated on the right. Inferring audience costs Must observe audience costs, both incurred and not incurred. Must observe audience costs both on and off the equilibrium path. Detecting audience costs amounts to recovering the underlying payoffs and payoff relations in the data.
Previous Tests Avoid Selection Bias 1st generation: Reduced Form Statistical tests of “reduced-form” behavioral implications as “revealed preferences.” 2nd generation: Experiments Monte Carlo simulations: Schultz (2001) Survey Experiments: Tomz (2007) and Kohno (2013) 3rd generation: Ignoring selection bias Case study: Snyder and Borghard (2011) Truncated data set Downes and Sechser (2012)
Audience Cost Model 1 Inference Problems 2 Research Strategy 3 Statistical Model of Audience Costs 4 Results 5 Existence of Audience Costs Magnitude of Audience Costs Effects of Audience Costs Causal Mechanism of Audience Costs
Research Strategy to Detect Audience Costs Our Strategy: Structural Approach Estimate underlying payoffs based on observed outcomes. ⇒ This allows us to measure AC that are not incurred. Estimate the theoretical model itself, not reduced-form tests
Research Strategy to Detect Audience Costs Our Strategy: Structural Approach Estimate underlying payoffs based on observed outcomes. ⇒ This allows us to measure AC that are not incurred. Estimate the theoretical model itself, not reduced-form tests Key Innovation: Estimator = Statistical Equilibrium
Research Strategy to Detect Audience Costs Our Strategy: Structural Approach Estimate underlying payoffs based on observed outcomes. ⇒ This allows us to measure AC that are not incurred. Estimate the theoretical model itself, not reduced-form tests Key Innovation: Estimator = Statistical Equilibrium AC theory and selection bias are a product of the PBE, so use the PBE to construct the estimator.
Research Strategy to Detect Audience Costs Our Strategy: Structural Approach Estimate underlying payoffs based on observed outcomes. ⇒ This allows us to measure AC that are not incurred. Estimate the theoretical model itself, not reduced-form tests Key Innovation: Estimator = Statistical Equilibrium AC theory and selection bias are a product of the PBE, so use the PBE to construct the estimator. Recent development in political science Statistical models based on Quantal Response Equilibrium Statistical models based on Perfect Bayesian Equilibrium
Research Strategy Structural Estimation Approach Theory: mapping from preferences to outcomes. Given by assumption Equilibrium Preference Choices & relations Outcomes Deduction
Research Strategy Structural Estimation Approach Theory: mapping from preferences to outcomes. Given by assumption Equilibrium Preference Choices & relations Outcomes Deduction Empirics: mapping from outcomes to preferences. Given by data Statistical Equilibrium Preference Choices & relations Outcomes Estimation
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