Abstract
A big power is facing a small power that may have developed WMDs. The small power can create strategic ambiguity by not allowing arms inspections. We study the impact of strategic ambiguity on arms proliferation and the probability of conflict. Creating strategic ambiguity is a substitute for actually acquiring new weapons: ambiguity reduces the incentive for the small power to invest in a weapons program, which reduces the risk of arms proliferation. Therefore, strategic ambiguity tends to benefit the big power. On the other hand, strategic ambiguity may hurt the small power because it does not always protect it from an attack. Cheap-talk messages can be used to trigger inspections when they are most valuable to the big power. To preserve incentive compatibility, the “tough” messages which make inspections more likely must imply a greater risk of arms proliferation.
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