Bargaining in International Relations

Bargaining—whether over arms control, the terms of a peace settlement, exchange rate coordination, alliances, or trade agreements—is a central feature of international relations. In the past decades, the literature on bargaining in international relations has seen much interesting research and has been at the forefront of formal work in international relations. Because bargaining is an activity in which the strategic interdependence of decision making is central, much of the literature is based on game-theoretic modeling.

Bargaining is the negotiation over the terms of an agreement. Although often more than one agreement exists that two or more actors would prefer to no agreement, the actors disagree regarding their ranking of the mutually preferable agreement. Moreover, bargaining involves interdependent actions. In other words, the decisions made by one actor will depend largely on the actual or likely decisions made by another actor. In addition, bargaining often has “rules of the game.” For example, actors can make demands or offers simultaneously, one actor could make a demand or offer and the other accepts or rejects (a so-called take-it-or-leave-it game), or the actors can make demands or offers sequentially. This brings us to another feature of bargaining: it is often dynamic. Finally, bargaining typically involves uncertainty about the other actor's preferences.

In sum, the process of bargaining in international relations is complex, and the literature on the topic spans the fields of history, economics, political science, and international relations. As we will see, conventional measures of power (physical strength or financial resources) are an important, but certainly not the only determinant of bargaining power. Issues such as credibility, multiple bargaining levels, enforcement possibilities, asymmetric information, indivisibility, commitment problems, political bias, and the social context all affect the bargaining outcome in important ways.