Abstract
ABSTRACT In this paper, we analyze the Israeli-Palestinian conflict by proposing a proxy war model, where conflict lasts longer, but it is less costly than direct military confrontation. In proxy wars, Nash equilibria are realizable, but not always sustainable in the long-run. The consolidation level of the double principal–agent relationship predicts the continuation of conflict and thus the emergence of peace. As our model suggests, the Israeli-Palestinian conflict is likely to remain irresolvable, as long as the Palestinians do not have a principal that is willing to provide continuous and positive levels of conflict involvement.
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