Decision-making in the shadow of strategic competition costs

Abstract

In today’s current climate of near-peer conflict, it is important to understand the dynamics of strategic competition. Understanding these dynamics will improve decision-making in this environment, which is often called the gray zone of conflict. I use a two-stage simultaneous move game to study the state of strategic competition. The simulation of this model reveals two dynamics through which strategic competition can be managed. The first is the probability of winning a confrontation. The second is the cost of actions. As the cost of more-aggressive actions increases relative to the cost of less-aggressive actions, then even with higher chances of winning a confrontation, players are incentivized to choose less-aggressive actions. Increasing costs of the most-aggressive actions, but not the less-aggressive ones, offers decision-makers a second avenue through which they can encourage less-aggressive competition, which is less likely to instigate a full crisis or lead to war.