This article discusses the necessary conditions for two countries at war to come to a settlement and explores how domestic and military costs, time preferences and attitudes toward risk affect the timing and the outcome of the peace. It views the termination of war as a process of rational calculations by the participants; unless both sides believe that they can be made better off by a settlement, the war will continue. An important result of this approach is that a reduction of hostilities may reduce the probability of a settlement taking place and thus prolong the war. It is also shown that increasing the probability of winning may not increase the probability of a settlement and that a country which only values the present need not be at a disadvantage in the negotiation.
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