Escalation and Cooperation in Conflict Situations: The Dollar Auction Revisited Export

@article{leininger-89, abstract = {We present a new game-theoretic analysis of an abstract auction game that captures essential strategic aspects of escalation phenomena. Two competitive adversaries commit resources irreversibly in order to win an indivisible prize; the winner will take the prize while both winner and loser incur the cost of their bids (investments). Following O'Neill (1986), we first reexamine a discrete version of the game and emphasize some strategic considerations that give rise to new bidding strategies of players. These new strategies, however, confirm O'Neill's result qualitatively: Rational players should not bid against each other. We then introduce a more general model of the game and show that escalatory competitive bids are compatible with equilibrium play. Equilibria with escalating bidding eventually realize a "draw": Initial firmness (leading to escalation) is followed by conciliatory behavior that eventually implements a common commitment level. 10.1177/0022002789033002003}, author = {Leininger, Wolfgang}, citeulike-article-id = {3812847}, citeulike-linkout-0 = {http://dx.doi.org/10.1177/0022002789033002003}, citeulike-linkout-1 = {http://jcr.sagepub.com/cgi/content/abstract/33/2/231}, day = {1}, doi = {10.1177/0022002789033002003}, journal = {Journal of Conflict Resolution}, keywords = {auctions, penny}, month = {June}, number = {2}, pages = {231--254}, posted-at = {2008-12-19 23:39:59}, priority = {2}, title = {Escalation and Cooperation in Conflict Situations: The Dollar Auction Revisited}, url = {http://dx.doi.org/10.1177/0022002789033002003}, volume = {33}, year = {1989} }

TY - JOUR ID - leininger-89 L3 - citeulike-article-id:3812847 N2 - We present a new game-theoretic analysis of an abstract auction game that captures essential strategic aspects of escalation phenomena. Two competitive adversaries commit resources irreversibly in order to win an indivisible prize; the winner will take the prize while both winner and loser incur the cost of their bids (investments). Following O'Neill (1986), we first reexamine a discrete version of the game and emphasize some strategic considerations that give rise to new bidding strategies of players. These new strategies, however, confirm O'Neill's result qualitatively: Rational players should not bid against each other. We then introduce a more general model of the game and show that escalatory competitive bids are compatible with equilibrium play. Equilibria with escalating bidding eventually realize a "draw": Initial firmness (leading to escalation) is followed by conciliatory behavior that eventually implements a common commitment level. 10.1177/0022002789033002003 IS - 2 JF - Journal of Conflict Resolution EP - 254 TI - Escalation and Cooperation in Conflict Situations: The Dollar Auction Revisited VL - 33 SP - 231 KW - auctions KW - penny AU - Leininger, Wolfgang PY - 1989/06/01/ UR - http://dx.doi.org/10.1177/0022002789033002003 ER -