Prolonged conflict exacts a devastating toll on families, communities and entire populations—a toll that, at least in theory, we “thinking animals” should avoid. This is because, in strictly rational terms, war is highly inefficient.
If both sides of a conflict were exactly on the same page about each side’s probability of victory, as well as how much it would cost them to wage a war—financially or politically, for example—they should logically be able to go straight to a successful analysis. It would be better for everyone to divide the contested resources in a way that is commensurate with these relative strengths and costs than to fight.
“With perfect information, we could come to an agreement,” he explains Sandeep Baliga, Kellogg professor of managerial economics and decision science. “Allow me to give you exactly the same reward you would get after a war anyway, or maybe a little more than that, and just buy you out.”
So then, using this logical framework, why do wars happen at all – and especially long wars?
A popular theory among game theorists is that major wars are caused by asymmetric information, with one side knowing its strength, for example, but the other side remaining in the dark. In this situation, war breaks out because the side with better information has an incentive to pretend to be stronger than it is (aka bluffing) to win a better deal, while the side with poorer information is reluctant to take anything on the other side is taken at face value (knowing, rightly so, that they might be bluffing). This may cause the negotiations to break down.
However, not all game theorists are convinced that asymmetric information can fully explain why long-term wars occur—for reasons we outline below.
But a new paper by Baliga and his colleague Tomas Sjostrom of Rutgers University confirms that asymmetric information can indeed cause sustained wars over long periods of time. It also examines the effectiveness of various actions third parties can take to bolster one side of a conflict – with implications that could be relevant to NATO’s support for Ukraine.
In the end, wars last when incentives to feign strength are strong. “Anything that increases the value of the bluff makes the war longer,” says Baliga.
The Coase conjecture
To understand the disagreement among economists about asymmetric information, we must first understand what is known as the “Coase conjecture,” which is called the late economist Ronald Coase;.
Consider a civil conflict involving a government and a rebel group. In this scenario, the power of the government is known to all parties, while the power of the rebel group is known only to itself—a classic example of asymmetric information.
The government’s best move would be to offer the rebel group a single deal, after which there would be no more deals for a long time. If the rebel group rejects the deal, the two sides begin fighting.
If the government suspects that the rebel group is strong, it will offer them a generous deal to prevent a war, which would be very costly (and if the rebel group is strong enough, could potentially lead to the collapse of the government) .
But if the government suspects that the rebel group is weak, the above strategy doesn’t make much sense. Instead, the government will offer a stingy deal. If the government is right, the rebels will be inclined to accept the deal anyway to avoid a long battle that could theirs loss of the team.
Either way, the government has a good chance of getting what it wants.
However, according to the Coase conjecture, there is a problem with this logic. The government’s take-it-or-leave-it offer is unlikely to be taken seriously. This is because, if the rebel group rejects the government’s stingy offer and the battle begins, the government now has new information that suggests the rebel group may be stronger than they had assumed.
This will make it in the government’s interest to quickly return to the negotiating table and offer a stronger deal. But the rebel group, regardless of its actual strength, will anticipate this eventuality, which means it will be motivated to hold out for an even stronger one. initial agreement.
For the rebel group, the incentives to bluff and show power “become very, very high because you can win a lot almost immediately later,” says Baliga.
If the government cannot reliably convince the rebel group to honor its take-it-or-leave-it offer, then it follows that regardless of the strength of the rebel group, it will receive an acceptable offer from the government almost immediately.
As a government, “I would basically give up and give you a big piece of the pie very quickly,” Baliga says.
Thus, the Coase conjecture holds that if bargaining opportunities are abundant, these conflicts fueled by asymmetric information should be resolved quickly.
However, it is clear that this is not always the case in the real world, where wars regularly last for months or years.
This has led some international relations scholars to argue that perhaps the failure to reach an agreement is not caused by asymmetric information but by something else, such as one side becoming more powerful over time and the other side deciding to fight them now when they are weak rather than grant them later when they are strong.
But Baliga and Sjostrom argue—using a new and surprisingly simple proof technique—that only asymmetric information can they explain the existence of long wars.
Why the Coase conjecture breaks down
In their proof, Baliga and Sjostrom show that the probability of either party collapsing, as well as the fact that the probability of the rebel group collapsing is unknown to the government, has a large impact on the negotiation process. This situation motivates a weak rebel group to want to fight rather than accept a bad deal, and also motivates the government to fight (if it suspects that the rebel group is weak) rather than make a generous deal that even a strong group would accept rebels. These motivations overturn the logic on which Coase’s conjecture is based and lead to a theory of long wars based on asymmetric information.
The basic idea here is that negotiations don’t work if one party or the other is afraid of getting such a bad deal that they’ll regret making the deal in the first place. The classic example in a financial context is a used car market where a buyer does not know whether the seller’s car is a peach or a lemon and would regret paying a peach price for a lemon.
The same situation can arise in a conflict context: the government may prefer to fight the weak rebel group rather than give it the ground that would satisfy a strong rebel group. If the government believes that the rebel group is likely to be weak (and therefore very likely to collapse), then even as a “thinking animal”, the government prefers to fight.
So the war begins — and Baliga and Sjostrom show that it must continue until all the benefits the weak rebel group would have gained from the bluff are gone. (These benefits decrease over time as the probability of a weak rebel group collapsing increases and their bluff payoff decreases.)
Third party intervention
In their analysis, Baliga and Sjostrom also considered what would happen if a third party intervened on behalf of the rebel group.
The third party has some options here. He can intervene by weakening the government or helping the rebel group. He can also act decisively or do his work on the sidelines. The challenge is that, given all the incentives and counter-incentives, it can be difficult to predict whether an action will do more harm than good.
For example, providing moderate levels of support to shore up a weak insurgent group could backfire if it made the bluff more attractive. Let’s say a third party supplies the group with advanced weapons that a strong guerrilla group (made up of trained mercenaries) could use well, but a weak guerrilla group (made up of volunteers) would have trouble using effectively. In this case, the incentives for a weak group to bluff and pretend to be strong (and therefore capable of handling weapons) would be shot up, prolonging the war.
Similarly, taking modest actions to weaken the government could help the rebel group – but as the relative position of the rebel group appears to be improving, the cost of offering the rebel group a “good deal” also increases, making the most advantageous bluff and government least willing to pay the rebel group. This could drag out the conflict even further, damaging a weak rebel group.
In other words, Baliga and Sjostrom find that interventions from a benevolent third party are not always helpful—and some only serve to prolong wars.
Ukraine and Russia
Baliga and Sjostrom began working on this paper early in the pandemic, before Russia invaded Ukraine. But the similarities between this conflict and the one described mathematically in their paper are not lost. After all, asymmetric information about Ukraine’s power played a major factor in Russia’s decision to invade, with Putin falsely expecting a quick takeover.
So what lessons does their evidence offer, particularly for groups like NATO or the US as they decide how to intervene on Ukraine’s behalf?
Given the difficulty of the game in the various support scenarios, the optimal thing for a third party to do is to take very decisive action, their evidence suggests, offering Ukraine what they describe as “overwhelming” support.
“They should intervene in such a way that the bluff factor is incredibly small because of your intervention,” says Baliga. That is, by quickly and dramatically boosting Ukraine’s power—and making sure Russia knows about it—NATO and the US could theoretically reduce the country’s need to bluff and hopefully shorten the conflict.
“What you’re doing is making it less important whether Ukraine was initially weak or strong, which is then more likely to end the conflict quickly.”
