Offsetting Uncertainty: Reassurance with Two-Sided Incomplete Information

Conventional models of bargaining and reassurance under incomplete information typically assume that signals are objectively cooperative or non-cooperative. Even if states are uncertain of each other's preferences, they know what types of actions the other will view as cooperative. Yet on many real-world issues, cooperation is subjective, and what constitutes a cooperative action is conditional on the receiver's preferences. We present a formal model showing that in these cases, two-sided incomplete information actually incentivizes honest behavior and facilitates credible signaling. Because uncertain senders do not know whether a particular action will even be interpreted as cooperative, they have little incentive to forgo pursuing their true goals in order to misrepresent. Thus, where cooperation is subjective, mutual uncertainty is "offsetting" such that states can quickly and accurately update their beliefs. We illustrate this dynamic through a case study of the Sino-Soviet split, and highlight the model's implications for contemporary US-China relations.