Reasons for Peace

I propose a stylized reputational bargaining model of war where two combatants split a surplus while they fight. Although fighting allocates resources, it inflicts significant and unequal costs and can destroy both the surplus and the means through which offers are exchanged. Combatants may also enter war due to non-strategic motives, such as vengeance or ethnic tensions, leading to inflexible demands. The model has a unique equilibrium explaining key trends in modern warfare. From the outset, the weaker combatant concedes to avoid conflict. If not, a war-of-attrition ensues until rare, battlefield information arrives. Upon its arrival, one side concedes immediately, or a renewed war-of-attrition follows with different concession dynamics. The model further predicts a partial and inverse relation between military and bargaining power. Lastly, it suggests that ceasefire-like policies increase the ex-ante probability of war and prolongs armed conflicts. These predictions are further tested using a detailed panel of wars held in the last 200 years.