Bargaining Theory and the Origins of War

Core Idea

If war is costly, why do rational states fight? Bargaining theory explains war as the result of bargaining breakdown. In theory, two states should be able to negotiate a division of territory or resources that both prefer to fighting. Wars occur when states cannot agree on a bargain, often due to incomplete information (not knowing the other's strength), indivisibility (territory cannot be split), or commitment problems (one side fears the other will later attack). This view contrasts with arguments that leaders are irrational or bloodthirsty.

How It's Best Learned

Analyze why Germany and Britain could not find a bargain before WWI or WWII. What made disputes over territory indivisible or credible commitment impossible?

Common Misconceptions

The bargaining theory does not claim wars never happen—it explains why rational players might rationally choose to fight rather than concede everything.

Explainer

From your work on the prisoner's dilemma and game theory, you've already encountered the core puzzle: rational actors can end up at mutually worse outcomes because of structural incentives. Bargaining theory applies this logic to war, but the puzzle it starts from is surprisingly sharp. War is almost always costly: soldiers die, infrastructure is destroyed, economies contract, and the winner often ends up with a devastated prize. If two rational states are going to fight over, say, a disputed territory, and both know that one side will win anyway, why don't they just divide the territory *before* fighting? Both would prefer the pre-war division (which avoids war costs) to the post-war outcome minus the costs. The puzzle is: if war is so expensive, why can't rational actors always find a negotiated deal both prefer to fighting?

The answer is that a range of acceptable deals almost always exists in theory — a set of outcomes both parties prefer to the expected value of war. If State A has a 70% chance of winning, it expects to gain 70% of the prize but bear war costs. State B expects to gain 30% but also bear war costs. Any negotiated split between those numbers would leave both better off. So the theoretical argument is that rational states should always find this range and negotiate within it — war should be impossible among rational actors. The fact that wars happen constantly means that something systematically prevents states from finding or sustaining these bargains.

Bargaining theory identifies three main mechanisms. First, incomplete information: states do not know each other's true military strength, resolve, or costs, and they have incentives to misrepresent them. A weak state may bluff strength to extract a better deal; a strong state may bluff resolve. These rational misrepresentations make it hard to identify the true range of acceptable deals — each side may believe it will win more than 50%, leaving a range of deals both prefer to war that neither can agree on because neither believes the other's signals. Second, indivisibility: some goods genuinely cannot be split. Jerusalem is claimed by multiple parties as an exclusive holy capital; dividing it is politically and symbolically impossible. When the object of dispute cannot be shared, negotiated deals may not exist. Third, commitment problems: even if states reach a deal today, what guarantees that a stronger state won't renegotiate by force tomorrow? If State A knows that granting concessions now will allow State B to grow stronger and demand more later, State A may prefer to fight now while it still has the advantage. The deal is not self-enforcing.

The commitment problem helps explain preventive wars — wars launched not because a state is threatened now but because it fears a deteriorating power position. Germany's early-war logic in 1914, by some accounts, followed this structure: fight now against a rising Russia before the window of opportunity closes. This is perfectly rational by bargaining theory's logic, even though the war was catastrophic — the problem was a structural inability to credibly commit to a future balance that would prevent Germany's security position from deteriorating.

The broader significance of bargaining theory is that it *disaggregates* the causes of war from leader irrationality or state evil. Even states with reasonable leaders, accurate information, and non-aggressive intent can fall into war because of structural features — misrepresentation incentives, indivisible objects, commitment failures — that no single decision-maker can escape unilaterally. This is a sobering implication: solving war requires solving the structural conditions, not just finding better leaders.