What the Enemy Knows: Common Knowledge and the Rationality of War

Abstract

Information has played a central role in understanding why international negotiations may break down into costly conflict. Barring indivisibilities or commitment problems, the literature finds that war can only occur between rational unitary actors because of private information about fundamentals such as capabilities, resolve, or costs. I show here, however, that negotiations may fail despite complete information about these fundamentals. All that is needed is for A to not know whether B knows -- uncertainty about uncertainty. To ensure peace, then, states need not only know each other's attributes, but also the other's knowledge thereof, and potentially his knowledge of her own knowledge, and so on. Existing models, however, focus on first-order uncertainty and assume common knowledge of information partitions -- an unlikely assumption, as states rarely know how much the other knows. This requirement of higher-order complete information illustrates the importance of explicitly incorporating information structures in bargaining models of conflict.

Keywords: Bargaining, conflict, war, common knowledge, uncertainty, information

JEL Classification: C72, D82, N4