Conflict as a Part of the Bargaining Process

This paper investigates the use of conflict as a bargaining instrument.
It first revises the arguments explaining the role of confrontation
as a source of information and its use during negotiations. Then it offers
evidence illustrating this phenomenon by analyzing a sample of
colonial and imperial wars. The second part of the paper explores a
bargaining model with one-sided incomplete information. Parties can
choose the scope of the confrontation they may want to engage in:
An absolute conflict that terminates the game or a limited conflict
that only introduces delay and conveys information about the eventual
outcome of the absolute one. It is shown that confrontation has a
double-edged effect: It may paradoxically open the door to agreement
when the uninformed party is so optimistic that no agreement is feasible.
But it can also create inefficiency when agreement is possible but
the informed agent has an incentive to improve her bargaining position
by fighting.