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We examine formally the link between domestic political institutions and policy choices in the context of eight empirical regularities that constitute the democratic peace. We demonstrate that democratic leaders, when faced with war, are more inclined to shift extra resources into the war effort than are autocrats. This follows because the survival of political leaders with larger winning coalitions hinges on successful policy. The extra effort made by democrats provides a military advantage over autocrats. This makes democrats unattractive targets, since their institutional constraints cause them to mobilize resources for the war effort. In addition to trying harder, democrats are more selective in their choice of targets. Because defeat is more likely to lead to domestic replacement for democrats than for autocrats, democrats only initiate wars they expect to win. These two factors lead to the interaction between polities that is often referred to as the democratic peace.

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Audience costs enable leaders to make credible commitments and to communicate their intentions to their adversaries during a crisis. I explain audience costs by simultaneously modeling crisis behavior and the domestic reelection process. I assume that a leader's ability influences the outcome of a crisis. As such, voters use outcomes as a signal of their leaders' quality. Leaders have incentives to make statements that deter their enemies abroad, since these statements also enhance their standing at home. Yet, such “cheap talk” foreign policy declarations are only credible when leaders suffer domestically if they fail to fulfill their commitments. In equilibrium, false promises are only made by the least competent types of leaders. Leaders that break their promises suffer electorally. Because initial domestic conditions and institutional arrangements affect the vulnerability of leaders to these domestic costs, such factors influence the credibility of policy declarations and, therefore, the crisis outcome.

Leaders face multiple threats to their political survival. In addition to surviving the threats to tenure from within the existing political systems, which is modeled using Bueno de Mesquita and colleagues ' (2003) selectorate theory, leaders risk being deposed through revolutions and coups. To ameliorate the threat of revolution, leaders can either increase public goods provisions to buy off potential revolutionaries or contract the provision of those public goods, such as freedom of assembly, transparency, and free press, which enable revolutionaries to coordinate. Which response a leader chooses depends upon existing institutions and the structure of government finances. These factors also affect the likelihood and direction of institutional change. Tests of leader survival indicate that revolutionary threats increase the likelihood of deposition for nondemocratic leaders. Leaders with access to resources such as foreign aid or natural resource rents are best equipped to survive these threats and avoid the occurrence of these threats in the first place.

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We model how the size of a leader's support coalition and government revenues affect trades between policy concessions and aid. We find that aid benefits donor and recipient leaders, while harming the recipient's, but not the donor's, citizenry. The willingness to grant policy concessions for aid depends on how easily leaders can reimburse supporters for their concession. As coalition size increases, incumbents rely more on public goods to reward supporters, making it difficult to compensate for policy concessions. Small-coalition leaders rely more on private goods to retain office, making it easier for them to grant policy concessions for aid. Empirical tests of bilateral aid transfers by Organization for Economic Cooperation and Development (OECD) nations between 1960 and 2001 support the predictions that (1) aid is given by wealthy, large-coalition systems; (2) relatively poor, small-coalition systems are most likely to get aid; but, (3) conditional on receiving aid, the amount increases as the recipient's coalition size, wealth, and policy salience increase. Evidence suggests that OECD members have little humanitarian motivation for aid giving.

A model of bargaining embedded within a random-walk model of warfare is developed. The conflict model contains aspects of both lottery-based and war-of-attrition models of conflict. Results show that future disputes are less likely to lead to armed conflict following long rather than short wars. Furthermore, should a subsequent dispute lead to armed conflict, the higher the cost and the longer the previous war, the shorter the conflict is likely to last. Nationsfightwhentheydisagreeaboutthenatureofwhatawarbetweenthemwould be like. In particular, when states disagree about who is likely to win or the costs of fighting, then they can fail to find a bargain that settles their differences (Blainey 1973). Nations therefore fight to resolve their differences of opinions. The act of waging war reveals information about the relative strengths of each side. As a war progresses, each side's beliefs about the likely outcome of continuing the war converge. Once the warring parties'beliefs have converged sufficiently, they can find a bargained solution to the conflict.The contemporary modeling tradition in international relations has conventionally thought of war as the breakdown of bargaining. Early models portrayed war as a oneshot lottery. Empirically, however, wars vary vastly in their intensity and duration. Moreover, few wars are fought to complete disarmament of one side or the other. Instead, most wars end when both sides prefer a division of the stakes at issue to continued conflict. Rather than continuing to fight until one side eliminates the other, the two sides reach a bargain or negotiated settlement. Our model is one of a growing number of models that opens the black box of warfare and treats conflict as part of the bargaining process rather than the end of the bargaining process (