Many of the most influential current approaches to international relations theory appeal to analogies between the international system and oligopolistic markets. However, the existing formal economic models of oligopoly have few counterparts in international relations theory. In this research the investigator develops a formal approach to international relations theory by beginning to formalize this analogy. Preliminary research by the investigator has already developed a natural model of a bipolar international system; established conditions sufficient to ensure the existence of a peaceful equilibrium in which neither state attacks; shown that there is a strictly Pareto dominant pair of peaceful equilibrium payoffs; and characterized the unique pure-stragey, peaceful, Markov perfect equilibrium that yields these payoffs. In the model, increases in the cost of fighting, a state's level of risk aversion, a state's discount factor, and the advantages of striking first are shown to increase the equilibrium level of armaments in the system. More generally, the model provides a framework for analyzing broader issues in international relations theory including the role of anarchy and the problem of absolute and relative gains. The current research extends this model in an effort to incorporate incomplete information, link the model with existing formal work on crisis bargaining, and broaden the scope of the analysis to encompass several issues in international political economy.
