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Political Brinkmanship And Compromise

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  • Helios Herrera
  • Antonin Macé
  • Matías Núñez

Abstract

We study how do‐or‐die threats ending negotiations affect gridlock and welfare when two opposing parties bargain. Failure to agree on a deal in any period implies a continuation of the negotiation. However, under brinkmanship, agreement failure in any period may precipitate a crisis with a small chance. In equilibrium, such brinkmanship threats improve the probability of an agreement, but also increase the risk of crisis. Brinkmanship reduces welfare when one might think it is most needed: severe gridlock. In this case, despite this global welfare loss, a party has incentives to use brinkmanship strategically to obtain a favorable bargaining position.

Suggested Citation

  • Helios Herrera & Antonin Macé & Matías Núñez, 2025. "Political Brinkmanship And Compromise," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 66(3), pages 1317-1339, August.
    • Handle: RePEc:wly:iecrev:v:66:y:2025:i:3:p:1317-1339
    DOI: 10.1111/iere.12760
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