expenditures by Juba could reduce Khartoum’s benefits from war and therefore reduce its incentives to violently retaliate in case of partition. At the same time, Khartoum has an incentive to invest in the military so as to improve its potential benefits from a hypothetical war and thus discourage Juba’s bid for independence.

In the second specification of the model, we relax the assumption about perfect information, allowing for uncertainty, on Juba’s part, about Khartoum’s expected gains from war and consequently about its response to a pro-independence vote. In this situation Khartoum has an interest in signaling a high payoff associated with war, thus discouraging Juba from pursuing partition. However, Khartoum’s signals would lack credibility because Juba knows that its adversary would have an incentive to misrepresent its incentive structure to discourage partition. In this specification of our model there is a risk of inadvertent war. An even more dire scenario is characterized by a combination of imperfect information and significantly increased military expenditures by both sides, which may move both actors beyond their preference for peace. In this case an additional risk of war emerges; where beside pushing both sides to misallocate scarce economic resources, an arms race between Khartoum and Juba would risk generating a security dilemma, in which each actor sees the other’s efforts to arm as potentially aggressive and may be tempted to launch a preventive attack for fear of being attacked in a moment of relative weakness.

The moral of the model at this juncture is that both sides are likely to engage in an arm race not because they prefer war to the status quo, rather because each side uses military expenditure as a signaling device. Khartoum would like to deter Juba from casting the partition vote, while Juba endeavors to make a military response by Khartoum as costly as possible. While tractability requires a focus on a quantitative metric like military expenditure, the predictions of the model can be generalized to include other means that increase costs, such as mobilizing allies within the other side’s regional powerbase. Indeed, both the NCP and the SPLM have exploited this option in the past during the civil war. For example, the NCP has trained, funded and armed tribal Southern Sudanese militias opposed to the SPLM, while the latter attempted to bring the war to the north through recruitment of fighters and building of military and political alliances with rebellious northern groups in Darfur and Eastern Sudan.

Because development is the opportunity cost of this militarization by both sides, the international community could have a positive role to play here and has clear incentives for intervention. Encouraging commitment to the peace process for both sides can decrease incentives for militarization and contribute to development. The international community could encourage this commitment by providing support to the completion of the CPA-mandated agenda, such as the demarcation of North-South borders; the census; the resolution of the disputed Abyei region; and other technical issues related to the general elections of 2009. We demonstrate how these basic steps can contribute to credible commitments by both actors. Moreover, urging more transparency on both sides’ military expenditures can reduce information asymmetries and thus the risk of war by miscalculation.

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