Don't Blink: Reputations for Resolve and Higher-Order Beliefs in Crisis Bargaining

Abstract

Reputations for resolve are said to be one of the few things worth fighting for, yet they remain inadequately understood. Discussions of reputation focus almost exclusively on first-order belief change — A stands firm, B updates his beliefs about A's resolve. Such first-order reputational effects are important, but they are not the whole story. Higher-order beliefs — what A believes about B's beliefs, and so on — can matter just as much, if not more. When A comes to believe that B is more resolved, this may decrease A's resolve, and this in turn may increase B's resolve, and so on. In other words, resolve is interdependent. We provide evidence from a survey experiment on quasi-elites that suggests observers make inferences along these lines. Countries are able to develop reputations, and the effects are large, general, and robust. Our estimates of the extent to which an exogenous increase in A's resolve decreases B's resolve indicate that higher-order beliefs are responsible for a large proportion of these effects (40-70%). We conclude by supporting the plausibility of our claims with anecdotal examples, positing scope conditions for the argument, and outlining promising areas for future research on higher-order belief dynamics.