LAUSR

Abstract Analyzing the resource allocation between productive and appropriative activities in a conflict between prey and predator, this paper demonstrates the possibility of Pareto-improving economic assistance from South Korea to North Korea, even when augmented resources are used by North Korea to build up more offensive weapons, if resource transfer is coupled with the enhanced security position of South Korea. Some combinations of resource transfer (carrot) and increased effectiveness of defense (stick) increase production efficiency by decreasing the total amount of appropriative activities in a conflict. These combinations of stick and carrot can in some cases change the behavior of North Korea from that of a pure predator to that of a part-time predator. These results shed some light on policy debates in South Korea's dealings with North Korea.