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According to systemic theories, war or peace is determined by the system which is the distribution of states. A war happens due to the structure regardless of decision makers. On the other hand, theories at the individual level argue that individuals matter. Prospect theory argues that risk propensity of decision makers has impacts on the estimation of both values and probabilities of triggering a war. This paper demonstrates how different risk attitudes influence decision-makers and how the decision-makers choose between war and peace. Using interaction games, the paper successfully links the factors of wars at the systemic level and that of the individual level. A case study on the relations between China and Japan in 1894-1945 is conducted to show how to dissect the reasons of war and peace based on the combination of prospect theory and power transition theory. [ABSTRACT FROM AUTHOR]

According to systemic theories, war or peace is determined by the power distribution of states. The power of Japan has approached that of the U.S. at least twice in the 20th century. However, Japan initiated a war against the U.S. while its power was still inferior. But, Japan chose to obey the U.S. while both states are in a period of power transition. This paper argues risk propensity of states is the influential factor to states' decision to war or peace. Prospect theory argues that risk propensity of states influences states' estimation on both values and probabilities of winning a war or other outcomes. Accordingly, this paper argues that risk-averse actors tend to perceive a later power-transition point; while risk-seeking actors tend to perceive a sooner power-transition point. Thus, states will not behavior as systemic theories claim. In other words, the structure of system provides an opportunity for states to initiate war, but risk propensity influences their perception of power distribution and their calculation of different options. In order to completely capture how the mindset of states influence their decision to war or peace, this paper sets up a framework of decision-making which combines factors from PTT and prospect theory. It is noteworthy that the framework of this paper does not treat risk propensity as an exogenous factor as Kim and Bueno de Mesquita (1995) do. The evidence demonstrates the framework explains well on the different choices of Japan in 1941 (war) and in 1980s (peace) and different behavior of the U.S. in 1941 (inaction) and in 1980s (strongly request). Specifically, risk-seeking Japan and the risk-averse U.S. ended with Japan's initiation of war in 1941 while the risk-averse Japan and risk-seeking U.S. ended with the U.S. strongly requested economic concessions of Japan in 1980s. This framework successfully dissects decision to war or peace from interactions between the structure and agents. Risk attitudes of leaders are influential to foreign policy making, especially for those vital ones. [ABSTRACT FROM AUTHOR]