Do States Signal by Sinking Costs or Downpaying Costs?

• In Event: Advances in Understanding Bargaining and Conflict

Abstract

Sinking costs to signal resolve has become a vital part of how the field of international relations (IR) understands crisis bargaining. Theoretically, the logic of a resolved state sinking costs or “burning money” to separate itself from an unresolved state is well established. But do states really sink costs and burn money in the real world? We address the question on three fronts. First, we document every example of sinking costs in the published IR literature, and find that none is a pure case of a sunk-cost signal – every example is a hybrid case that involves signaling mechanisms or strategies beyond sinking costs. Second, we explain this is the case because sunk-cost signaling is dominated by other signaling strategies. Rather than burning money for no constructive purpose, states are better served by strategies that use those resources constructively. In particular, states can either invest in improving the probability of victory (“balance tilting”) or downpay the costs of war. Finally, we develop the concept of downpaying costs, a signaling strategy that is largely unexplored in the literature but widely applied in the real world. The most direct application is when a state fights the first part of a war to signal willingness to fight the rest. Additional forms of downpaying costs include military mobilization, brinkmanship, economic sanctions, and faits accomplis. Downpaying costs therefore offers a plausible explanation for a great deal of state behavior in peacetime, in crises, and even in wartime.

Authors

• Kai Quek, University of Hong Kong

• Dan Altman, Georgia State University