Escalation Bargaining: Theoretical Analysis and Experimental Test
AbstractThe standard chicken game is a popular model of certain important real scenarios but does not allow for the escalation behaviour these are typically associated with. This is problematic if the critical, final decisions in these scenarios are sensitive to previous escalation. We introduce and analyse, theoretically and by experiment, a new game which permits escalation behaviour. Compared with an equivalent chicken game, Pareto-suboptimal outcomes are significantly more frequent. This result is inconsistent with our rational choice analysis and possible psychological roots are explored.
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Bibliographic InfoPaper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2011-05.
Date of creation: May 2011
Date of revision:
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escalation; brinkmanship; chicken game; experiments;
Other versions of this item:
- Swee-Hoon Chuah & Robert Hoffmann & Jeremy Larner, 2011. "Escalation Bargaining: Theoretical Analysis and Experimental Test," Discussion Papers 2011-05, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
- Swee-Hoon Chuah & Robert Hoffmann & Jeremy Larner, 2011. "Escalation Bargaining: Theoretical Analysis and Experimental Test," ICBBR Working Papers 16, International Centre for Behavioural Business Research.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-25 (All new papers)
- NEP-CBE-2011-06-25 (Cognitive & Behavioural Economics)
- NEP-EXP-2011-06-25 (Experimental Economics)
- NEP-GTH-2011-06-25 (Game Theory)
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