- Elgar original reference
Edited by Christopher J. Coyne and Rachel L. Mathers
24 Conflict, credibility and asset prices Gregory M. Dempster and Justin P. Isaacs “As I dare say you are aware, negotiations to end the war have been going on for some time: that is why my principal and I have been to Paris. They have succeeded. Peace will be signed in the next few days.” “Good Lord above!” cried Jack. “Yes, indeed,” said Palmer. “And of course there are an infinity of reflections to be made. But what is to my immediate purpose is that as soon as the news is made public, Government stock and a large variety of commercial shares will rise enormously, some of them cent per cent.” “Good Lord above,” said Jack again. “A man who bought now,” said Palmer, “would make a great deal of money before next settling day; he might borrow or pledge his credit or make time bargains with great confidence.”1 24.1 INTRODUCTION No matter what the specific nature of the contract, a problem inherent in all types of conflict resolution is the uncertainty of whether the participants are legitimately committed to delivering on their part of the agreement. The absence of an effective enforcement mechanism often means that parties to peace agreements will have an incentive to defect from the contract in future periods. Furthermore, each party involved in the negotiation process will recognize that other parties have an incentive to change their behavior in future periods, and will thus be wary of making binding agreements in the interest of...
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