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Escalation Bargaining: Theoretical Analysis and Experimental Test

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Abstract

The 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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  • 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.
    • Handle: RePEc:bbr:workpa:16
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    Cited by:

    1. Wilhelms, Steven C. & Coatney, Kalyn T. & Chaudhry, Anita M. & Rodgers, Aaron D., 2016. "Brinkmanship on the Commons: A Laboratory Experiment Related to African Pulaar Herders," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230085, Southern Agricultural Economics Association.
    2. Fuhai Hong & Larry Karp, 2014. "International Environmental Agreements with Endogenous or Exogenous Risk," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(3), pages 365-394.

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    More about this item

    Keywords

    Escalation; Brinkmanship; Chicken game; Experiments;
    All these keywords.

    JEL classification:

    • 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

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