Mutual Optimism as a Rationalist Cause of War
Blainey (1988) popularized the argument that crises are more likely to end in war when two nations disagree about their relative bargaining power. This is known as the 'mutual optimism' cause of war. Fey and Ramsay (2007) claim that this explanation is not logically coherent. They prove for a general class of models that war cannot occur with positive probability in equilibrium because of mutual optimism. We show that their environment relies on two assumptions that are substantively implausible. If we relax either assumption, war occurs with positive probability in equilibrium when there is sufficient optimism. We also argue that any substantively compelling model of crisis bargaining, by definition, cannot belong to the class studied by Fey and Ramsay (2007). Consequently, while their result is mathematically correct, it cannot tell us much about crisis bargaining in general and mutual optimism in particular.
mutual optimism, common knowledge, equilibrium war, crisis bargaining