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To account for variance in great powers' responses to threats and the implications for the peacefulness of the international system since the late nineteenth century, this article elucidates a theory which refines and synthesizes economic liberal perspectives and realist balance of power theory. I argue that different patterns and levels of economic interdependence in the great power system generate societal-based economic constraints on, or incentives for, state leaders of status quo powers hoping to mobilize economic resources and political support to oppose perceived threats. This mobilization process influences strongly the preferences of status quo powers, other states' beliefs about those preferences, and the interpretation of signals in balance of power politics. In this way, economic ties influence the strategies great powers pursue. Firm balancing policies conducive to peace in the international system are most likely, I then hypothesize, when there are extensive economic ties among status quo powers and few or no such links between them and perceived threatening powers. When economic interdependence is not significant between status quo powers or if status quo powers have strong economic links with threatening powers, weaker balancing postures and conciliatory policies by status quo powers, and aggression by aspiring revisionist powers, are more likely. I then illustrate how these hypotheses explain the development of the Franco-Russian alliance of the 1890s and its effectiveness as a deterrent of Germany up to 1905, British ambivalence toward Germany from 1906 to the First World War, the weakness of British, French, Soviet, and American behavior toward Germany in the 1930s and World War II, and the American and European responses to the Soviet threat, including the NATO alliance, and the "long peace" of the post-1945 era.Realist balance of power theorists have long argued that states tend to oppose threatening powers in the international system. This balancing behavior is seen to be an optimal response by states and conducive to international stability (cf. Gulick,

Alliances are promises of cooperation, but allies typically have to bargain over what policy should be adopted when a given contingency arises. Whether this bargaining leads to collaborative outcomes and what form cooperation by allies takes have important implications for the effectiveness of an alliance. Neorealism and neoliberal institutionalism, the author argues, do not provide adequate explanations for this problem because they mischaracterize, or fail to come to grips with, the bargaining process at work. To redress such shortcomings, the author turns to game theory, providing a general model of intra-alliance bargaining. The model's insights are then used to interpret the historical record on U.S. Bosnia policy from 1991 until the fall of 1995. The author shows how domestic and international considerations affected the preferences and beliefs of the Bush and Clinton administrations. These led, as suggested by the model, to the U.S. tendency to avoid bargaining hard with the NATO allies and to pursue compromise strategies with them in the Bosnian crisis.

The relationship between economic interdependence and military conºict is among the most studied and debated in the international relations literature. Scholars who argue that economic ties reduce the likelihood of conºict have struggled to reconcile this view with the outbreak of World War I. The conventional wisdom among political scientists is that World War I constituted a failure of economic integration to maintain peace. 1 Even prominent advocates of liberal theory view World War I as an unfortunate contradiction to the general argument that trade inhibits conºict. 2 These arguments are important for several reasons. First, they bear on schol-ars' understanding of the causes of war and peace and on more pragmatic issues of policy in an increasingly globalized, but still fractious, world. Whether interdependence encourages states to resolve differences diplomatically or not Trading on Preconceptions the anonymous reviewers for helpful comments and suggestions.