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Escalation Bargaining: Theoretical Analysis and Experimental Test

Swee-Hoon Chuah (), Robert Hoffmann () and Jeremy Larner ()
Additional contact information
Jeremy Larner: Nottingham University Business School

ICBBR Working Papers from International Centre for Behavioural Business Research

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.

Keywords: Escalation; Brinkmanship; Chicken game; Experiments (search for similar items in EconPapers)
JEL-codes: C72 C78 C91 (search for similar items in EconPapers)
Date: 2011-05-13
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-gth
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Citations: View citations in EconPapers (3) Track citations by RSS feed

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http://www.nottingham.ac.uk/~lizecon/RePEc/bbr/pdf/16.pdf

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Working Paper: Escalation Bargaining: Theoretical Analysis and Experimental Test (2011) Downloads
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