Though this post may look like a political one, it is not! The reader is invited to choose his favorite good, bad and ugly.
The state of Israel has a long history with organizations that try to hurt it. One of the organizations that fight Israel most dearly in the last decade is Hezbollah, based in Lebanon. Hezbollah used to regularly shoot missiles on Israeli villages, and Israel used to regularly bombard military bases in Lebanon. The usual warfare you would expect.
In the summer of 2006, retaliating the capture of two Israeli soldiers by Hezbollah, Israeli army was sent into Lebanon to hurt the Hezbollah as much as it could. After 33 days Israel has proved its ability to smash the military ability of Hezbollah. Hezbollah stopped firing missiles on Israel.
This is history. Where is game theory getting into play?
After Hezbollah realized that its ability to fight the Israeli army is close to nothing, it renewed its missile stock and acquired much better missiles that it used to have. Currently it holds accurate missiles with long range that can carry a lot of TNT. Next time that Israel attacks Lebanon, the whole of Israel will be bombarded; there will be no escape. A problem to Israel. But what about Hezbollah? Suppose that Hezbollah renews firing missiles on Israeli civil targets. Israel, realizing that Hezbollah is going to actually use its missiles against Israeli civil population, may react before Hezbollah uses everything that it has. Because Hezbollah can shoot missiles from all parts of Lebanon, the only way would be to conquer all of Lebanon, as fast as possible. A problem to Hezbollah.
So, now we are in a balance of terror. Before the 2006 war, each side could have shot missiles/bombard the other from time to time; now they cannot: any small skirmish may develop into an all-out war, where both sides will be severely damaged. Did the Israeli government envision this future before starting the war? Did the Hezbollah? Did any of the two sides do a strategic analysis of the situation?