Physiological Responses to Shifting Bargaining Power : Micro-Foundations of Commitment Problems 1

Commitment problems are often regarded as one of the most important, and common, causes of international conflict. IR work on the subject suggests that, at the microlevel, shifting bargaining power can generate an incentive to reject offers, and thus lead to a costly conflict that destroys resources. Despite this, there is a noticeable gap in our understanding of how commitment problems change individual behavior in actual bargaining. We use a novel experimental protocol to study how individuals react to changes in bargaining power in a game where bargaining power is operationalized as the probability of winning all the resources. We use a psycho-physiological measure– skin conductance–in order to assess individuals’ reactions to bargaining. We find that i) people are more likely to reject offers when they expect the opponent’s bargaining power to increase (and hence support for a key pillar in IR theory). We also find, only in the presence of a large shift in power: ii) higher (i.e., better) offers lead to less arousal, and iii) higher physiological arousal decreases rejection decisions, perhaps due to an increase in ‘aversive’ physiological arousal and the resultant difficulties in making “strategically optimal” decisions. Our novel findings suggest that when individuals face large power shifts, arousal may allow more intuitive decision-making and less backward induction. This suggests that under certain circumstances, emotionally-aroused individuals are less prone to commitment problems. Given that conflict is costly and destroys resources, why does it occur? More than any other, it is this foundational question that lies at the heart of the scientific study of international relations. Given its prominence, scores of explanations have been posed over the years. One of the most promising class of theories are rationalist accounts of wars, which frequently turn on the presence of a commitment problem or incomplete information. One mechanism in particular–commitment problems–has had an enormous influence on the study of international conflict and is often argued to be fundamental to understanding the breakdown of peace. Commitment problems arise because shifts in bargaining strength generate incentives in the future to renege on current commitments. For example, if country i is increasing in strength relative to country j, country i will find it difficult to “credibly commit” to not taking advantage of j in the future. With this in mind, the actor whose power is declining prefers conflict while they have a bargaining advantage rather than a peaceful resolution that may leave them open to predation in the future. Due to liquidity constraints, bargainers cannot prevent their opponents from being concerned about such adverse shifts. This can lead to conflict despite the fact that it is costly (Fearon, 1995, 2004; Powell, 2006). Thus, future changes in bargaining power have been used to explain preventive war, whereby a declining state chooses to wage a war against the opponent to take advantage of its bargaining advantages (Fearon, 1995). In this paper we develop and test for the role of emotions in a stylized decision-making context where there are shifts in bargaining power over time. In doing so we try to push for a greater integration of cognitive and affective forces in decision-making. In recent years the international relations literature has seen a proliferation of work studying the behavioral foundations of bargaining, drawing heavily on experimental methods that have human subjects bargaining over resources or responding to hypothetical Incomplete information explanations shift the focus to how the anarchic international environment prevents bargainers from revealing their true valuation for a war outcome (Fearon, 1995). This type of explanation for conflict has been studied using experimental methods elsewhere (Tingley and Wang, 2010). The role of commitment problems in other settings is also well developed theoretically and empirically with observational data (Greif et al., 1994; Simmons, 1994; Simmons and Danner, 2010).