A Misfit model: irrational deterrence and bounded rationality

Karl Sörenson ()
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Karl Sörenson: KTH - Royal Institute of Technology

Theory and Decision, 2023, vol. 94, issue 4, No 2, 575-591

Abstract: Abstract Contemporary theories of deterrence place a strong emphasis on coherency between model and theory. Schelling’s contention of irrational threats for successful deterrence abandons the rationality assumption to explain how a player can deter, thereby departing from the standard game theoretic solution concepts. It is a misfit model in relation to a deterrence theory and, therefore, excluded. The article defends and remodels Schelling’s intuition by employing the level-k model. It is shown that an unsophisticated player that randomizes over its strategies brings about an advantageous outcome. The model also shows that the belief that a player randomizes has the same deterrent effect, as an actual stochastic choice, like Schelling suggested. While this means Schelling’s idea can be saved, it is still problematic how we should view contributions of bounded rationality in relation to current deterrence theory. The article suggests that separating the purpose of a model in conjunction with allowing other scientific ideals than model-theory coherence permits a broader and philosophically sounder approach.

Keywords: Deterrence; Game theory; Bounded rationality; Level-k (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11238-022-09907-7

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