This paper revisits the signalling literature of the interactions between terrorist organisations and governments. It argues that the theoretical literature to date, and particularly the signalling literature, builds models from the very singular backdrop of transnational terrorist spectaculars. Accordingly, policy recommendations cannot be extended to a broader realm of terrorist threats. By inverting the nature of the signalling, flipping it from a violent act to a peaceful one, this paper more accurately represents the continued interactions between terrorists and governments. A Revolutionary organisation exists and engages with the Incumbent government in order to affect material change to some aspect of the status quo. The Revolutionary believes that violence action and, in some cases, peacemaking, can achieve these goals. The Incumbent is suspicious of the Revolutionary and cannot observe if the Revolutionary is committed to violence or uses it, only, as a political tool. In the first period, the Revolutionary uses a costly peacemaking signal, selected from a continuous set, in an attempt to reveal its type and intentions to the Incumbent. In the second stage, both players engage simultaneously, choosing to devote resources to joint peaceful interaction or unilateral violence. This model sets out conditions that support pooling equilibria in which the signalling phase is ineffective and a separating equilibrium where the structure of the Incumbent’s beliefs leads to differences in the Revolutionary’s equilibrium behaviour. Accordingly, this model supports outcomes where Incumbent’s beliefs and incentives can deter a nominally peaceful terrorist organisation for ceasing violence, whilst also providing a rational as to why political resolutions are the most common means to end terrorist conflicts.
