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Abstract
Traditional arguments that link credibility to a reputation for resolve, power, or strength are contrasted with a model that posits that credibility arises from the expectation of future, continued gains from retaining an honest record. Diplomatic statements are believed only if a country's or leader's credibility is unmarred. Leaders keep their word so that they are believed in later crises. Two environments are contrasted: one in which a country's record for honesty resides within the country as a whole and another in which reputation resides with individual leaders. In this latter case, citizens have an incentive to remove leaders caught bluffing. More robust than previous reputation theories, this model also offers comparative statics for when diplomacy will be more effective—namely, when leaders are domestically accountable.
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