Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/62031 
Year of Publication: 
2012
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2012: Neue Wege und Herausforderungen für den Arbeitsmarkt des 21. Jahrhunderts - Session: Conflict and Disputes No. C20-V3
Publisher: 
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
Abstract: 
Initiating a conflict is an investment in social, political or economic change. The decision to attack is sequential in time, irreversible and, more important, includes highly uncertain and erratic threats and opportunities yet completely disregarded in confict theory. In this dynamic model of decision making we focus on the time dimension of an escalating conflict. In order to cover the effects of high uncertainties we extend methods in real option theory by introducing a discontinuous Ito-L vy Jump Diffusion processes. We analytically derive a threshold that triggers the attack and determine the expected time of action. With this new discontinuous processs we are able to show that an increasing number and intensity of oppressive government actions may lead to an earlier outbreak of conflict. However, even if latent conflicts are not immediately solved policies can prolong the peace period to find a long term solution to the conflict.
JEL: 
D74
D81
C61
Document Type: 
Conference Paper

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