Slate's article on game theory in the Middle East is pretty good, but I believe Wright underestimates the power of his option #1 (irrational hatred). War is not an auction, and when it has been run as one -- most famously in Vietnam by Johnson, Nixon and their hardy band of "incrementalists" -- its managers manage to kill more while accomplishing less.
This is a 19th century, Viennese-opera conception of war. I'd suggest going back to Thucydides to see what tribal warfare is all about.