Bargaining Under the Shadow of War
From a rational-choice perspective, the current Iran–United States–Israel interaction is best modeled as a three-player bargaining game conducted under the shadow of war. The actors possess asymmetric capabilities and divergent risk tolerances, yet their preference orderings exhibit partial convergence at the upper end of their respective utility functions—most notably in their shared desire to avoid large-scale regional conflict.
The United States occupies the structurally dominant position, and its preferences are therefore decisive. At the top of the U.S. utility function is the avoidance of a major war with Iran, which would entail substantial military, economic, and political costs. Conditional on peace, Washington prefers a negotiated nuclear arrangement that constrains Iran’s enrichment to low levels—preferably lower than the 3.67 percent threshold established by the JCPOA—over more maximalist demands such as zero enrichment, far-reaching ballistic missile restrictions, or comprehensive rollbacks of Iran’s regional proxy network. While desirable, these latter objectives significantly raise the probability of Iranian rejection and thus increase the risk of war. From a rational-choice standpoint, a limited but enforceable nuclear agreement that credibly extends breakout timelines strictly dominates more ambitious agreements that are unlikely to be accepted or sustained.
At the same time, regime change in Iran constitutes an attractive theoretical outcome for the United States, particularly given the regime’s internal weakness, economic fragility, and declining domestic legitimacy. In abstract utility terms, a friendly or collapsed Iranian regime would dominate any negotiated settlement. However, this preference is sharply discounted once costs and domestic political incentives are incorporated. Under the Trump administration, U.S. preferences were shaped by a strong bias toward highly visible, low-cost victories that could be claimed without prolonged military engagement. Large-scale war, occupation, or nation-building—especially in the Middle East—ranked extremely low due to electoral incentives, MAGA coalition preferences, and the political salience of avoiding “endless wars.” As a result, regime change through military means was not a feasible equilibrium objective unless it could be achieved at near-zero cost, which was implausible given Iran’s size, capabilities, and regional reach. Thus, while regime change was attractive in principle, it was dominated in practice by outcomes that delivered symbolic strength and strategic restraint without sustained commitment or high casualty risk.
Iran’s preferences mirror this structure, though from a weaker strategic position. Tehran prefers a negotiated settlement that preserves limited enrichment capability and symbolic regime dignity over military confrontation, particularly given its economic fragility and the unfavorable balance of conventional power. The low-percentage enrichment cap functions as a focal point, enabling Iran to claim continued adherence to its interpretation of NPT rights while reassuring adversaries regarding nuclear breakout. By contrast, demands for total enrichment abandonment or sweeping concessions on missiles and regional influence generate sharp utility losses. Ballistic missiles and proxy forces are not peripheral bargaining assets but central components of Iran’s deterrence strategy and regime-survival calculus. Consequently, if faced with a choice between relinquishing these capabilities and accepting conflict, Iran is likely to resist and tolerate escalation. On regional proxy activity, however, Iran displays greater flexibility, particularly through ambiguity, informal restraint, or face-saving arrangements that reduce visible support without formal capitulation.
Israel occupies a strategically significant yet structurally constrained position. Lacking the capacity to sustain a full-scale war with Iran independently, Israel’s leverage operates primarily through its ability to shape U.S. perceptions and preferences. Israel strongly favors a more restrictive outcome on Iran’s nuclear program and, ideally, binding constraints on missiles and proxies. When Washington signals willingness to accept a limited nuclear deal, Israel’s principal remaining instrument is the threat of unilateral military action designed to increase the perceived probability of escalation and thereby alter U.S. calculations. This constitutes a form of brinkmanship that is partially credible but ultimately limited by Israel’s dependence on U.S. diplomatic and military support. Israel can therefore raise the risk of escalation but cannot unilaterally determine the bargaining equilibrium.
Given these preference orderings and constraints, the most likely equilibrium outcome is a least-cost cooperative arrangement in which the United States and Iran converge on a limited nuclear agreement centered on low-level enrichment caps, enhanced monitoring, and breakout prevention, while deferring or soft-pedaling missile and proxy issues. These secondary concerns are likely to remain outside the formal agreement or to be addressed through vague language, side understandings, or future negotiations. Although suboptimal for all actors in absolute terms, this outcome strictly dominates non-cooperative alternatives under prevailing threat structures.
The principal risk lies not in preference incompatibility but in misperception and timing. Domestic political pressures, preemptive incentives, or misinterpretation of signals—particularly surrounding Israeli threats or Iranian deterrent actions—could generate escalation despite all actors ranking war as a low-utility outcome. In game-theoretic terms, the interaction is vulnerable to coordination failure, producing inadvertent movement toward a war equilibrium that none of the players actively prefers.
Overall, rational-choice analysis suggests that a return to a limited nuclear agreement resembling the original JCPOA—featuring a low-percentage enrichment cap and the absence of enforceable constraints on missiles or regional proxies—constitutes the only equilibrium outcome that all major actors prefer to large-scale conflict. This reflects not normative idealism but strategic realism, even as such an equilibrium remains fragile and susceptible to breakdown through miscalculation.