Policy bargaining and militarized conflict

Studies of bargaining and war generally focus on two sources of incomplete information: uncertainty over the probability of victory and uncertainty over the costs of fighting. We introduce uncertainty over preferences of a spatial policy and argue for its relevance in crisis bargaining. Under these conditions, standard results from the bargaining model of war break down: peace can be Pareto inefficient and it may be impossible to avoid war. We then extend the model to allow for cheap talk pre-play communication. Whereas incentives to misrepresent normally render cheap talk irrelevant, here communication can cause peace and ensure that agreements are efficient. Moreover, peace can become more likely as (1) the variance in the proposer’s belief about its opponent’s type increases and (2) the costs of war decrease. Our results indicate that one major purpose of diplomacy is simply to communicate preferences and that such communications can be credible.