Veto Bargaining with Incomplete Information and Risk Preference: An Analysis of Brinkmanship

Hwang Joongsan ()
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Hwang Joongsan: 1877 University of Colorado Boulder , Boulder, CO, USA

Peace Economics, Peace Science, and Public Policy, 2025, vol. 31, issue 3, 259-303

Abstract: This paper explains brinkmanship with infinitely repeated veto bargaining games, where players have private information. In the basic model, the paper solves for two types of Perfect Bayesian Equilibria. First, in Risk-Taking Equilibria (RTE), the proposer is more risk-seeking and engages in brinkmanship. Secondly, in Risk-Avoiding Equilibria (RAE), the proposer is more risk-averse and does not engage in it. Brinkmanship is likely to fail because the vetoer knows that once she succumbs to brinkmanship, the proposer will learn her weakness and make her worse offers. In the extended model, thresholds represent preconditions for negotiation. In the Threshold Pooling Equilibria (TPE) for the extended model, the vetoer sets a threshold and sticks to it. This way, the vetoer may increase her expected utility.

Keywords: brinkmanship; bargaining game; risk preference; veto bargaining; precondition; labor strike (search for similar items in EconPapers)
JEL-codes: C78 D74 D81 D82 F51 J52 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/peps-2025-0020

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