This chapter presents the bargaining model of war. The basic approach of the bargaining model is to frame the onset, prosecution, and termination of war as a bargaining process: war represents a failure of two sides to reach a peaceful bargain settling a dispute over an issue such as a territorial border, and during war states continue to bargain, searching for a peace settlement both sides prefer over continuing to fight. Using very little math, the chapter introduces a number of key concepts, such as ideal points, reservation points, reversion outcomes, and bargaining space. It also lays out three possible bargaining model explanations as to why wars break out: when the sides disagree about the likely outcome of a war; when at least one side doubts the credibility of the other side to abide by commitments to peace; and when the issue under dispute is perceived to be indivisible. The chapter also develops information and commitment credibility perspectives on bargaining during wartime, and how wars eventually end. It applies these ideas to a summary of a quantitative study of the effects of peacekeeping on civil war outcomes, and to a case study of World War II in the Pacific.

Institutional weaknesses can be attributed to limited human and/or financial capacity, limited accountability, limited commitment and limited fiscal capacity. Ignoring institutional limitations increases the odds of inefficient regulation, undesirable social side effects and excessive fiscal burdens. To address some of the limitations, most countries have created specialized separate regulatory agencies (SRA). The SRA model has been less popular for water and transport regulation, which continues to be largely managed by units within ministries or agencies directly controlled by the ministries, than for telecoms and electricity. Countries with overlapping and interconnected network facilities are increasingly considering moving part of the regulatory responsibilities to supranational agencies. In contrast to the theoretical predictions, the empirical evidence on the effectiveness of SRAs in terms of efficiency, equity, financial/fiscal viability and accountability is mixed. There is no single perfect institutional solution that applies to all sectors and all countries. The existence of an agency is neither a necessary nor a sufficient condition for performance improvements of a public utility. Hybrid models that combine traditional visions with more modern approaches, which include a role for civil society and for expert panels, can be better to match the local country context.