Recent writings in this paper have discussed the application of game theory to the present political gridlock in Nepal. The end of the unilateral ceasefire on 2 January provides the opportunity to extend the analysis and examine the conflict between the army and Maoists as a game of war.

The outcome of the standard war of attrition game between two sides is that the weaker side, knowing that it cannot win, cuts its losses by accepting defeat immediately. But since we don't observe this outcome (in Nepal and in most real-life wars or conflicts) this simple logic sheds very little light on the true mechanisms at work. The next obvious step is to ask what factors are complicating the situation. There could be two explanations.

First, the absence of reliable information makes it hard to determine which is the weaker side. The two parties may have different beliefs and are taking a chance prolonging the war in hope that there will be a clear advantage in the future.

The problem is that each party must also believe that its military strength will grow faster than the other side's rate of improvement. As the government comes closer to signing a truce, limited foreign military assistance may induce it to think that it has achieved the military capability necessary for victory, when in fact it is under-calculating its target level.

The army is more likely to get it wrong since the Maoists can observe the army's militarisation better than the army can monitor rebel strength. The result is that both sides continue to fight even though there is no clear winner. In hindsight, both sides will find that bloodshed could have been avoided.

The second explanation is that both sides are fighting not to win but to achieve a stronger bargaining position at the negotiating table. One strategy for both parties is to dynamically signal to the opponent how patient it can be (or how many deaths it can endure) by not giving up or by not being perturbed by the number of casualties it suffers. This is similar to a war of attrition game where the impatience level of each side can't be observed by the opposing side.

By continuing to fight, the government can signal to the Maoists that it is ready to suffer many more casualties. If the Maoists behave similarly, the game that is played is no longer a war but a signalling game. In the absence of proper intelligence, all threats are credible, resulting in an escalation of casualties.

On the other hand, false signalling may not be an optimal strategy at all. Signalling impatience levels or offering different settlement deals at different times may give the opposing side information regarding one's belief about one's own strength relative to the other, or it may be a method of providing false information.

If true beliefs are revealed over time (as fighting continues) the lying side loses credibility and negotiating a fair settlement becomes harder. In the end, the lying side will have actually given more information than intended (eg, the method it uses to lies). If such information creates advantages for the honest side it may actually be optimal to be honest.

If both sides agree on what would happen if they continued to fight, they should cut their losses and sign a truce immediately. Further, if each side recognises the optimality in being honest about its capabilities, then it may be possible to come to a consensus on what the disagreement payoffs would be (ie, what the consequences would be if they continued to fight).

Coming to such a consensus should be the first stage of negotiations. In the second stage, the parties would have to agree on what present arrangements would equal the disagreement payoffs of the future.

The desire of the political parties, on the other hand, is that democracy will be preserved and reinstated. There is obviously a trade-off between minimising deaths and keeping the status quo (since the government can minimise the costs of the war by giving up now but given the Maoist agenda that is unlikely to preserve democracy) and this trade-off is probably very high given that presently the government under the king is seeking not necessarily to preserve democracy in general but to preserve the monarchy, while the Maoists are fighting primarily for the establishment of a republic of some kind.

Nevertheless, it is likely that there are some intermediate arrangements that are possible and acceptable to all three sides, although finding them may require a more creative approach from scholars and a purposeful dialogue between the government and Maoists.

Avidit Acharya is studying mathematics and economics at Yale University in the United States.