Is high-intensity conflict escalation inevitable in the future? A two-level game analysis on the causes of US-Iran risky rivalry

Abstract In recent years, there appears to be a growing consensus among policymakers in both the East and the West, that the decades of global peace after the Cold War has now come to an end, and that the world is facing mounting security risks to the future of humanity. Among those challenges, the ongoing U.S.-Iran conflict poses particularly significant risks to regional and global security, and is closely related to many other contemporary international crises involving European states and their allies, particularly the Russo-Ukrainian War, the nuclear proliferation in Europe, and the military disputes between the Iran-backed Houthis and EU forces. But why has the U.S.-Iran relationship deteriorated so dramatically over the past years, and what are the future risks its presents to the international community? While extensive scholarly works have been conducted to examine the ideological, historical, and geopolitical variables that fuel this observed escalating antagonism, no study to date has formal-modelled the complex interactions between Tehran and Washington into a two-level game. Utilizing an infinitely-repeated game theory approach, this research presents a comprehensive analytical framework that explains how interrelated political factors at both the international and the domestic level jointly shape the dynamic of this bilateral relationship. We contend that the domestic rally effect created by risk-oriented diplomacy, incompatible ideological stances and political values, the increasing polarization within U.S. Congress, and the mounting rivalry between Israel and the Iran-led Axis of Resistance convince policymakers from both sides that their utilities can be maximized in a non-cooperative game. Based on our models, it can be forecasted that there is hardly any chance Washington and Tehran will concede to the other’s security demands in the foreseeable future. Thus, the risks of high-intensity conflict escalation due to miscalculation will continue to upsurge in the future.