Brexit: Brinkmanship and CompromiseHelios Herrera
24 June 2021
Helios Herrera (University of Warwick), 17:15 - 18:45, presents his project in the Interdisciplinary Research Seminar of the GRK "Collective Decision-Making”.
This seminar will take place as a Zoom meeting. Please register (if you haven’t already) here if you want to attend the seminar. We invite everyone interested to attend!
Abstract
(joint work with Antonin Mace and Matias Nunez)
We study how do-or-die threats ending negotiations affect gridlock and welfare in the ratification of deals/treaties between opposing parties. Failure to agree in any period, as usual, implies a status-quo disagreement payoff and a continuation of the negotiation: a renegotiated amended agreement to be ratified next period. However, under brinkmanship, agreement failure in any period may precipitate instead a “hard” outcome, worse than the status-quo and than any feasible agreement. Such brinkmanship threats improve the scope for agreement, but also entail costs as we show. With symmetric parties only more extreme brinkmanship is beneficial: when an agreement is unlikely to begin with mild brinkmanship only reduces welfare by increasing the equilibrium chance of a hard outcome. If a party is advantaged it typically benefits even from mild threats, as the expected agreement shifts in its favor, while only extreme brinkmanship threats can benefit the disadvantaged party.
For the paper, see here.