Strategic Ambiguity and Arms Proliferation, Journal of Political Economy
A big country is facing a small country that may have developed weapons of mass destruction. The small country can create strategic ambiguity by not allowing arms inspections. We study the impact of strategic ambiguity on arms proliferation and the probability of conflict. We find that creating strategic ambiguity is a substitute for actually acquiring new weapons: behind the veil of ambiguity, there is less incentive for the small country to invest in a weapons program. Therefore, strategic ambiguity reduces the risk of arms proliferation. On the other hand, strategic ambiguity may hurt the small country because it does not always protect it from an attack. We allow cheap-talk, and find that messages can be used to trigger inspections when they are most valuable to the big country. To preserve incentive compatibility, the "tough" messages which make inspections more likely must also imply a greater risk of arms proliferation.
Sandeep Baliga, Tomas Sjostrom
Baliga, Sandeep, and Tomas Sjostrom. 2008. Strategic Ambiguity and Arms Proliferation. Journal of Political Economy. 116(6): 1023-1058.