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A simple case of rationality of escalation

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  • Pierre Lescanne

    (LIP - Laboratoire de l'Informatique du Parallélisme - ENS de Lyon - École normale supérieure de Lyon - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - Inria - Institut National de Recherche en Informatique et en Automatique - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

Abstract

Escalation is the fact that in a game (for instance an auction), the agents play forever. It is not necessary to consider complex examples to establish its rationality. In particular, the $0,1$-game is an extremely simple infinite game in which escalation arises naturally and rationally. In some sense, it can be considered as the paradigm of escalation. Through an example of economic games, we show the benefit economics can take of coinduction.

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  • Pierre Lescanne, 2013. "A simple case of rationality of escalation," Post-Print ensl-00832490, HAL.
    • Handle: RePEc:hal:journl:ensl-00832490
    Note: View the original document on HAL open archive server: https://ens-lyon.hal.science/ensl-00832490
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    References listed on IDEAS

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    8. Aumann, Robert J., 1995. "Backward induction and common knowledge of rationality," Games and Economic Behavior, Elsevier, vol. 8(1), pages 6-19.
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    More about this item

    Keywords

    economic game; infinite game; sequential game; crash; escalation; speculative bubble; coinduction; auction;
    All these keywords.

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