Why do humans so often become trapped in protracted conflicts even when peaceful settlement would be mutually beneficial? Across a series of experiments using a temporally extended territorial conflict game, we show that failures of intention inference play a central role in sustaining conflict and that payoff-irrelevant perceptual structure can substantially facilitate settlement. When conflict unfolds in a perceptually unstructured environment, participants' ability to distinguish defensive from offensive actions remains near chance, accompanied by a systematic bias toward inferring hostile intent from defensive behavior. This distortion in intention inference drives self-reinforcing escalation, capturing at a psychological level the security dilemma long emphasized in political theories of conflict. By contrast, introducing a payoff-irrelevant territorial Gestalt that segments the environment into perceptually salient regions dramatically improves intention inference. These Gestalt boundaries function as psychological focal points, constraining strategic reasoning, aligning expectations, and enabling reciprocal settlement despite the absence of explicit communication. We propose that perceptual organization shapes the goal space over which theory of mind operates, thereby stabilizing intention inference in high-stakes interactions. More broadly, these findings suggest that social cognition and strategic reasoning are grounded in perceptual organization of action affordances, challenging accounts that treat intention uncertainty as an inevitable feature of severe conflict. (PsycInfo Database Record (c) 2026 APA, all rights reserved).
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