Page 10 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.79, # 2, 2022, pp. 4-18

wars could create sustainability (peace) if the war costs are high and the scores are
low.

Horner et al. (2015) studied the relation between mediation and peace and designing
the mechanism for conflict resolution in international relations. They showed that
uninterrupted communication helps conflict reduction since it enables the conflicting
parties to disclose themselves.

Kimbrough et al. (2017) studied the theories, applications and the conflict of interest
and war in economy. They examined the main models of conflict and conflict of
interest and showed that in recent empirical literature, the results confirm the theory
of conflicts with both laboratory and field data.

Anderson and Mukherjee (2019) investigated seeking no war, achieving no peace.
Their model survey “no war, no peace” situations in a game theoretical framework
where two countries are engaged in a standoff over a military sector. They suggested
two different pathways. The first is idealistic and based on mutual trust whereas the
second is based on deterrence meaning that both countries impose a threat of using
armed force against the other country in their respective military doctrines.

Salimian and Almasifard (2020) studied the economic grounds of peace using game
theory. Presenting a static game between players, they modeled the behavior of
investors and countries concerning the possible strategies for each player. To this end,
they first considered a state where two countries are indifferent. Then, in the second
state, two competing countries (enemies) were considered and in the third state, three
countries were assumed, one of which was the competitor and the other was an
indifferent country. Concerning the obtained equilibrium in three states, the overall
result showed that the investor achieves the best consequence (Nash equilibrium) by
constituting portfolio and investing in various markets and inside the country by
interaction and peace.
According to studies in the field of economics and peace mentioned, most studies in
the fields of economy and peace have used game theories to achieve equilibrium in a
certain field (mostly oil and gas) and have not considered it from the view of peace.
Therefore, this paper, theoretically and by presenting a model, deals with this issue on
how economy could provide the grounds for international peace and utilize game
theory. The above presented research about peace and economy is not based on
financial markets and this research is presented for the first time about the role
financial markets on peace using important variables such as risk in local and foreign
markets, returns in local and foreign markets, economic power of countries and the
degree of hostility between countries by modeling. Therefore, this is the innovation
of this research.

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