Peace in the Face of Uncertainty: Resource Allocation with Stochastic Armaments

TL;DR

This paper analyzes how governments allocate resources strategically under uncertain military threats, revealing that low uncertainty favors peace-promoting strategies while high uncertainty increases conflict risk.

Contribution

It introduces a model of resource allocation under stochastic military power, highlighting how uncertainty levels influence peace or conflict decisions.

Findings

Low uncertainty leads to peace-oriented resource distribution.

High uncertainty increases the likelihood of conflict.

Resource allocation strategies vary inversely with uncertainty levels.

Abstract

This paper examines a government's strategic resource allocation choices when facing an opposing group whose military power is uncertain. We investigate how this uncertainty affects the government's decision to divide resources in a way that either guarantees peace, despite unresolved uncertainty, or risks conflict. We find that under low uncertainty, the government prefers distributions which ensure peace, while under high uncertainty, they are willing to risk war. When uncertainty is low, the government's allocation is decreasing in uncertainty. When uncertainty is high it is increasing. The latter leads to an increased probability of fighting and falling total welfare.