University of Massachusetts Amherst ScholarWorks@UMass Amherst Economics Department Working Paper Series Economics 2021 Land for peace? Israel-Palestine through the lens of game theory Amal Ahmad Department of Economics, University of Massachusetts Amherst Follow this and additional works at: https://scholarworks.umass.edu/econ_workingpaper Part of the Economics Commons Recommended Citation Ahmad, Amal, "Land for peace? Israel-Palestine through the lens of game theory" (2021). Economics Department Working Paper Series. 301. https://doi.org/10.7275/21792057 This Article is brought to you for free and open access by the Economics at ScholarWorks@UMass Amherst. It has been accepted for inclusion in Economics Department Working Paper Series by an authorized administrator of ScholarWorks@UMass Amherst. For more information, please contact [email protected]. Land for peace? Israel-Palestine through the lens of game theory Amal Ahmad∗ February 2021 Abstract Why have Israel and the Palestinians failed to implement a \land for peace" solution, along the lines of the Oslo Accords? This paper studies the applica- tion of game theory to this question. I show that existing models of the conflict largely rely on unrealistic assumptions about what the main actors are trying to achieve. Specifically, they assume that Israel is strategically interested in withdrawing from the occupied territories pending resolvable security concerns but that it is obstructed from doing so by violent Palestinians with other objec- tives. I use historical analysis along with bargaining theory to shed doubt on this assumption, and to argue that the persistence of conflict has been aligned with, not contrary to, the interests of the militarily powerful party, Israel. JEL Classification: D74, F51 Keywords: Israel-Palestine, international conflicts, strategic behavior ∗Department of Economics, University of Massachusetts Amherst. Email: amalah- [email protected]. I am grateful to James Heintz, Daniele Girardi, Peter Skott, Mariam Majd, Roberto Veneziani, and Emily Wang for very helpful comments on earlier drafts of this paper, as well as the participants of the Analytical Political Economy Workshop. All remaining errors are my own. 1 1 Introduction Strategic political interactions between individuals, political organizations, and states can sometimes be understood as \games" among rational or semi-rational ac- tors. For this reason, game theory has been increasingly applied in political science to subjects such as public choice (Rowley and Schneider, 2004), voting theory (Ace- moglu, 2010), lobbying (Aitken-Turff and Jackson, 2006), civil war (Blattman and Miguel, 2010), and inter-state conflict (Powell, 2002). This paper contributes to the literature on game theory applications to inter-state political conflict; specifically, I investigate the application of game theory to one of the most protracted conflicts of the past century, the Israeli-Palestinian one. I examine papers that use game theoretic principles to explain key components of the conflict and highlight what they assume about the actors' strategic interests. I then offer a critique of some of the predominant assumptions in the literature, and draw on bargaining theory to exemplify different ways that game theory can more realistically model strategic interests and explain the endurance of the conflict. The review of the game theoretic literature on Israel-Palestine makes three things clear. First, the application of game theory to the subject has been limited even though the conflict is one of the most protracted and hotly debated of the twentieth century. The number of studies is small and many of them follow in the fifteen year period immediately after the initiation of the Oslo Peace Accords in 1993. The Accords, signed by Israel and the Palestine Liberation Organization (PLO), promised a five year plan for Israel to withdraw from the territories it occupied in 1967 and grant Palestinians sovereignty in exchange for Palestinian compliance with Israeli security demands; this is referred to as the two-state solution or \land for peace" paradigm. Figure 1 shows the occupied Palestinian territories (West Bank, East 2 Jerusalem, and Gaza) over which the Accords were negotiated. [Figure 1 here] Second, the majority of papers aim to use the principles of strategic interaction and rational behavior to explain the increasingly obvious failure of the Oslo Accords in generating a two-state solution. Instead of two sovereign states, the post-Oslo period has been marred by continued Israeli settlement growth as well as episodes of violence, including during the second Palestinian Intifada or uprising (2000-2005). Eschewing the idea that the absence of a solution is illogical, these papers are interested in pointing to strategic interests that can explain continued conflict between Israel and the Palestinians. Methodologically, many use formal models though some apply game theoretic principles to Israel-Palestine without formal modelling. Third, when distilled to their core assumptions, many papers, and most formal ones, assume that the Israeli state is strategically interested in withdrawing and granting the Palestinians sovereignty over the territory occupied in 1967 pending resolvable security concerns, but that all or some Palestinians have other objectives and use violence to achieve them, thereby explaining the collapse of any land for peace deal. Informed by these assumptions, the existing models largely present the conflict as an impasse or deadlock perpetuated by short-term hostilities, with the responsibility for this impasse falling on the shoulders of these Palestinian factions conducting or aiding hostilities. The assumption that the militarily strong party, Israel, is willing to withdraw from the occupied territories in a land for peace deal is so embedded in these models that it often goes unexplained and undefended. Instead, the main debate (and differ- ence between the models) concerns the motivations and strategies of the Palestinians spoiling this opportunity. 3 In contrast, I show that papers on Israel-Palestine that draw on the principles of game theory and strategic behavior but informally and using interdisciplinary meth- ods suggest alternative explanations for the failure of the two-state solution. In particular, these papers suggest that Israel is possibly not willing, for reasons beyond security concerns, to withdraw from the occupied territories. However, the inference from these papers about the strategic interests of relevant parties is often implicit, not highlighted with clarity, and limited to the analysis of short time periods. The informal analyses also make a comparison with more formal contributions difficult. After examining the above literature, I argue that the predominant assumption in the formal game theoretic models, that Israel is strategically interested in withdraw- ing from the occupied territories, is flawed. I do this by overviewing Israeli settlement policy since the beginning of the occupation in 1967, since settlements are very costly and difficult-to-reverse investments and are thus a credible signal of long-term strate- gic interest in the land. This analysis shows that Israel has pursued the expansion, not retrenchment, of its control in the occupied territories as a top national priority under all circumstances. I also show how Israel's security discourse can be understood in this context. To highlight the importance of the land for peace assumption in driving any conclusions about the conflict, I sketch the outlines of an alternative game, adapted from Fearon (1997), that assumes that Israel instead sees the territories as highly strategic and integral for its future. Under these modified assumptions, the game can produce a moving equilibrium where Israel pursues nonstop settlement expansion in the territories, effectively blocking the possibility of a two-state solution and matching what we see on the ground. The conclusions thus become very different to those in the formal literature, and, as I argue, more historically plausible. I conclude that it is plausible that the militarily dominant party (Israel) is not 4 interested in relinquishing control over the territories but the opposite, that this is not a temporary result of security concerns but rooted in the long term interests of the state in a highly strategic asset, and that this can help explain the worsening trajectory of the conflict. Moreover, contracts like the Oslo Peace Accords would by design fail to produce a two-state solution since they would not be self-enforced. This paper's contribution is twofold. First, it illustrates how game theory has been applied to an important and ongoing conflict, driven, at least in the formal literature, by dubious assumptions about the strategic interests of the key parties involved. In turn, this renders the ability of these models to explain the trajectory of the conflict poor at best, and misleading at worst. Second, the paper helps clarify our thinking about Israel-Palestine by addressing head-on the question of strategic national interests, using analysis at the intersection of history and game theory. To my knowledge, this is the first paper to systematically tackle the application of game theory to Israel-Palestine. The paper is structured as follows. Section 2 examines the literature that applies game theoretic principles to the subject, classifying papers by the assumptions they make about Israel and the Palestinians' strategic interests. Section 3 provides a historical