Cheap talk diplomacy, voluntary negotiations, and variable bargaining power

It is well known that during a crisis, unitary rational states have an incentive to misrepresent their true resolve and willingness to go to war. This theoretical result has been taken to imply that diplomacy, interpreted as pre-bargaining communication, can have no effect on the way crises play out. This paper shows an intuitive way that diplomatic cheap talk can matter in a single crisis between countries, especially when the bargaining game has multiple equilibria. In particular, if after "diplomacy" states can choose to either fight a war directly or bargain in hopes of reaching a peaceful settlement, then it is possible to find an equilibrium, where diplomacy influences whether there is war or peace. Importantly, the cheap talk diplomacy does three things the standard model says it cannot: it coordinates actions, it reveals information, and it changes the ex ante probability of war. This result demonstrates an easy way of reconciling the discrepancy between the obvious empirical observation that diplomacy often does influence the path of a crisis with the rationalist model of war.