CeDEx workshop - Jeremy Larner (Nottingham University Business School)

Escalation Bargaining: a preliminary experimental analysis

Situations involving brinkmanship or escalation are often modelled by use of a one-shot ‘chicken game’. We argue that such situations typically involve a sequence of gradual and irreversible decisions which influence behaviour. We design and implement an escalation game as an experimental test of this proposition, and find significant differences in behaviour between one-shot chicken games and the final round of an escalation game with identical payoffs. We also look at the effects of strategy method vs. direct response treatments, and find some evidence for emotional involvement in decision making.