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Rational Escalation

Author

Listed:
  • Gabrielle Demange

    (DELTA - Département et Laboratoire d'Economie Théorique et Appliquée - 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)

Abstract

In many conflicts, protagonists commit resources that will not be returned. These situations, which often lead to apparently wasteful escalation, are well captured by the following "all-pay" auction. Two bidders bid repeatedly for a prize until one drops out. As usual the prize goes to the highest bidder but both bidders, the winner and the looser, pay their bids. Not only a process of escalation may be rational but it may be the only reasonable rational issue. We indeed prove that, if there is some uncertainty about the strength of the players, the only stable equilibrium may entail escalation. This result corroborates the idea that escalation is primarily a struggle to determine which player is the strongest one.

Suggested Citation

  • Gabrielle Demange, 1992. "Rational Escalation," Post-Print halshs-00671021, HAL.
    • Handle: RePEc:hal:journl:halshs-00671021
    DOI: 10.2307/20075865
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    Cited by:

    1. Dan Kovenock & Brian Roberson, 2009. "Is the 50-State Strategy Optimal?," Journal of Theoretical Politics, , vol. 21(2), pages 213-236, April.
    2. Johannes Hörner & Nicolas Sahuguet, 2011. "A war of attrition with endogenous effort levels," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 1-27, May.
    3. Norman, Thomas W.L., 2018. "Inefficient stage Nash is not stable," Journal of Economic Theory, Elsevier, vol. 178(C), pages 275-293.

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    Keywords

    game theory; economic models;

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