Arms, Intelligence, and War

How do states respond to uncertainty over their opponents’ military strength? We analyze a model of crisis bargaining in which, prior to negotiation, an uninformed state chooses how to allocate scarce resources across armaments and intelligence gathering. Arming improves military capabilities, while intelligence gathering improves estimates of the other state’s military capabilities. Our model thus allows both the distribution of power and the level of uncertainty in the crisis to be determined endogenously. We derive some notable results. First, the relationship between information revelation and war is conditional on beliefs held before the information is received, as more accurate information can reduce the probability of war for optimistic states but increase it for pessimistic ones. Second, the allocations that minimize the probability of war are often not those made in equilibrium. Finally, considering the interdependence between the two allocations yields unique insights into the relationship between the distribution of capabilities, uncertainty, and the risk of war.