Political Brinkmanship and Compromise

Helios Herrera, Antonin Macé () and Matías Núñez
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Helios Herrera: University of Warwick [Coventry], CEPR - Center for Economic Policy Research
Antonin Macé: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris
Matías Núñez: CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique

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Abstract: We study how do‐or‐die threats ending negotiations affect gridlock and welfare when two opposing parties bargain. Failure to agree on a deal in any period implies a continuation of the negotiation. However, under brinkmanship, agreement failure in any period may precipitate a crisis with a small chance. In equilibrium, such brinkmanship threats improve the probability of an agreement, but also increase the risk of crisis. Brinkmanship reduces welfare when one might think it is most needed: severe gridlock. In this case, despite this global welfare loss, a party has incentives to use brinkmanship strategically to obtain a favorable bargaining position.

Date: 2025
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Published in International Economic Review, inPress, ⟨10.1111/iere.12760⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-05163106

DOI: 10.1111/iere.12760

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