The Russo-Japanese War features a failure of rational bargaining theory. Indeed, it shows how difficult it is for actors to successfully reach a mutually acceptable bargain, even when many of the conditions are favorable. An obvious quid pro quo existed during the crisis, and at one point the Russian ambassador, Rosen, and the Japanese representative actually agreed to it. Nevertheless, Alekseiev, the viceroy of the Russian Far East province – and later, the tsar himself – overruled Rosen. Although we identify several factors that contributed to this bargaining failure, domestic politics played a major role. Agreement occurred at a low(er) bureaucratic level; hard-liners in Russia, however, occupied the highest decision-making level(s) and overruled the obvious solution, thereby causing an unnecessary war. It is also worth noting that when Japan decided on war, it executed a surprise attack on Port Arthur. Because this attack succeeded, Japanese decision-makers learned it was effective and repeated the strategy in 1941 at Pearl Harbor.