A simple case of rationality of escalation

Pierre Lescanne ()
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Pierre Lescanne: LIP - Laboratoire de l'Informatique du Parallélisme - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - Inria - Institut National de Recherche en Informatique et en Automatique - Université de Lyon - CNRS - Centre National de la Recherche Scientifique

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Abstract: Escalation is the fact that in a game (for instance an auction), the agents play forever. It is not necessary to consider complex examples to establish its rationality. In particular, the $0,1$-game is an extremely simple infinite game in which escalation arises naturally and rationally. In some sense, it can be considered as the paradigm of escalation. Through an example of economic games, we show the benefit economics can take of coinduction.

Keywords: economic game; infinite game; sequential game; crash; escalation; speculative bubble; coinduction; auction (search for similar items in EconPapers)
Date: 2013-09-03
New Economics Papers: this item is included in nep-gth and nep-hpe
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Published in 5th Conference on Algebra and Coalgebra in Computer Science, CALCO 2013, Sep 2013, Warsaw, Poland. pp.191-204

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