In the past, rival parties have known everything important about the potential conflict--the probability of victory, their own costs, and the other's costs. What happens if they are unsure about the other side? The answer is that negotiators must consider the risk-return tradeoff. Aggressive bargaining positions pay off when the other side concedes but leads to costly war when it fails. Conservative bargaining positions are more likely to lead to peace but come at the price of greater concessions. Resolving the tradeoff requires calculating the relative chances of being successful against the costs of failure. Note: The final inequality should include "+ C_G" in the denominator. My bad.