Abstract This paper develops a dynamic game-theoretic framework to analyze security competition between two states that can invest in a technology to eliminate their rival. Extending the canonical one-shot game, our model incorporates a negotiation (settlement) stage and assumes effective diplomacy, which rules out payoff-dominated equilibria. We fully characterize equilibrium behavior across all discount factors and compare outcomes under high and low elimination costs. The dynamic structure reveals why, even with optimal coordination, long-lasting disarmed peace is rare. By combining the dynamics of military escalation with the constraints of effective diplomacy, the model rationalizes historical cycles of peace, arms races, and conflict. Our approach identifies strategic mechanisms that restrict the sustainability of disarmament and clarifies the conditions under which arms races or conflict become inevitable, offering a deeper understanding of the recurrent nature of international conflict under repeated interaction.
Caro-Burnett et al. (Tue,) studied this question.