Rational Escalation

Gabrielle Demange

Annals of Economics and Statistics, 1992, issue 25-26, 227-249

Abstract: In many conflicts, protagonists commit resources that will not be returned. These situations, which often lead to apparently wasteful escalation, are well captured by the following "all-pay" auction. Two bidders bid repeatedly for a prize until one drops out. As usual the prize goes to the highest bidder but both bidders, the winner and the looser, pay their bids. Not only a process of escalation may be rational but it may be the only reasonable rational issue. We indeed prove that, if there is some uncertainty about the strength of the players, the only stable equilibrium may entail escalation. This result corroborates the idea that escalation is primarily a struggle to determine which player is the strongest one.

Date: 1992
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.jstor.org/stable/20075865 (text/html)

Related works:
Working Paper: Rational Escalation (1992)
Working Paper: Rational Escalation (1991)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1992:i:25-26:p:227-249

Access Statistics for this article

Annals of Economics and Statistics is currently edited by Laurent Linnemer

More articles in Annals of Economics and Statistics from GENES Contact information at EDIRC.
Bibliographic data for series maintained by Secretariat General () and Laurent Linnemer ().