As we have seen, guaranteed assistance from third-party defenders can create a moral hazard problem. In this chapter, I examine how third-party defenders design alliance contracts to deter aggression against an ally while mitigating the undesirable effects of moral hazard. The argument asserts that defenders select different commitment types depending on certain factors, such as countries’ relative capabilities, their security and foreign policy goals, and the observability of their actions in war. One option for addressing moral hazard is to form an ambiguous or probabilistic commitment, which creates uncertainty about whether the defender will intervene on its ally's behalf. This uncertainty can balance the third party's competing objectives by tempering the disputants’ reactions to the commitment. Ambiguity also has an additional advantage: it can induce policy settlements more to the third party's liking, because disputants that are unsure about whether the third party will intervene have incentives to make moderate demands in conflict bargaining.

The outline of the chapter is as follows. First, I will provide an intuitive explanation of the argument. Then I will illustrate the logic of the theory using three formal models. As in Chapter 3, conflict and war are incorporated into the theory using the standard bargaining model of conflict (Fearon 1995). Because the standard model has only two actors, the key distinction in the models provided here is the addition of a third-party defender that selects a type of commitment prior to conflict bargaining and then chooses a level of assistance to transfer to the protégé if bargaining fails and war occurs. The first model, which is presented in the fourth section, is a baseline model in which the third party forms a commitment with an ally in anticipation of an adversary initiating conflict bargaining. In this model, all the actions leading to war are observable to the third party. In the fifth section, I extend the baseline model to include the possibility that either the adversary or the protégé might initiate conflict bargaining. This extension of the analysis permits the examination of truly conditional commitments, which are designed to activate if the disputants take certain actions specified in the alliance agreement.