	give in	stand firm
give in	C₂ C₁	W₂ L₁
stand firm	L₂ W₁	P₂ P₁

Bargaining tactics may be used by P1 to induce P2 to “Give In,” so that P1 can safely “Stand Firm.” (Obviously P2 can use the same tactics.) Examples may pertain to

A. Players can somehow make (absolutely) credible commitments. The first player to make a commitment to “stand firm” wins.

A. Messages that project an image of P1 to P2 or that convey to P2 P1’s (claimed) image of P2.

1. P1 projects an image that suggests P1 is crazy, irrational, emotional, and uncalculating and generally that P1 doesn’t understand the risks of standing firm. (This has been called the “rationality of irrationality” or “the political uses of madness.”)

(a) P1 tries to appear to be a “force of nature,” so the only reasonable response by P2 is to give in and minimize damage

(a) P1 exhibits (apparently) erratic, emotional, self-defeating, irrational behavior

(c) terrorists, escaped prisoners, and most criminals have an inherent bargaining advantage over the authorities in this respect

(d) the child throws a deliberate temper-tantrum [“sophisticated screaming”]

(g) Mr. K’s [Soviet leader Nikita Khrushchev] “shoe-thumping”and other incidents

Note: such tactics can be dangerous, as they give P2 an incentive to engage in preventive or pre-emptive action

2. P1 attributes rationality (and perhaps cowardice) to P2, claiming P2 understands the risks of standing firm

(g) Mr. K to JFK: “only a madman would fight a nuclear war over Berlin – and I don’t think you’re mad (but can you be sure I’m not mad — remember my “shoe-thumping” and other erratic behavior?).”

B. Messages designed to influence the perceived (not actual) values of payoffs W, C, L, or P

1. P1 conveys impression that he regards P₁ is not so bad, so maybe P₁ is no worse than L₁, which implies that P1 believes that standing firm is a dominant strategy (thereby compelling P2 to give in)

(b) P1 claims that his car is crash-proof (Note: P1 does not have to persuade P2 that P1’s car is crash-proof, only that P1 believes that it is so)

(d) the child says “I don’t even want any dessert [so you can’t make me eat my vegetables]”

(f) union/company releases report purporting to show that they can readily survive a long strike/lockout

(h) P1 releases study showing that his civil defense preparations are so effective that P1 can survive nuclear war

2. P1 conveys impression that he regards L₁ as worse than it really is, so again maybe P₁ is no worse than L₁, which implies that P1 believes that standing firm is a dominant strategy (thereby compelling P2 to give in)

(b) P1 claims that he believes that to be revealed as “chicken” is a fate worse than death

(c) the hostage holders reveal that they believe that they are already under a death sentence (e.g., for prior criminal convictions)

(e) the buyer conveys the impression that his “reservation price” (the highest price he would actually be willing to pay) is lower than it actually is

(e) the seller conveys the impression that his “reservation price” (the lowest price he would actually be willing to take) is higher than it actually is

(f) the company reveals that it believes it would go out of business of it gave in to union wage demands

3. P1 tries to persuade P2 that C₂ is as good as W₂, so that P2 will believe that giving in is P2’s dominant strategy, and therefore P1 can safely stand firm

(a) P1 assures P2 that “this is my last demand” — it is not costly for you to give in and it won’t set a precedent for the future [but see below on “reputation effects”]

4. P1 conveys the impression that he believes P2’s preferences are such that C₂ is as good as W₂ and that giving in is therefore P2’s dominant strategy, so P1 can safely stand firm

(b) P1 conveys the impression that he believes that P1 doesn’t care if he is revealed to be “chicken”

(e) the seller conveys impression that he believes that the buyer’s reservation price is high

(e) the buyer conveys impression that he believes that the seller’s reservation price is lower

(f) the union conveys impression that it believes than management can easily pay higher wages

1. P1 changes actual payoff values for P2 so that “giving in” is more attractive (and perhaps actually dominant) for P2

Note: a problem with this strategic move is that, not only are the concessions (presumably) coming out of P1’s pocket (reducing C₁), but also that P1 may look too anxious to avoid P₁, so that it seems safer for P2 to stand firm and aim to get W₂.

ii. P1 takes actions to increase the value of L₂, e.g., to provide P2 with a “graceful exit,” to avoid seeking “unconditional surrender,” to promise to treat surrendering forces humanely, etc., making giving in a more palatable choice for P2 and making it safer for P1 to stand firm, further reinforcing P2’s incentive to give in

2. P1 changes actual payoff values for himself so that “standing firm” is evidently more attractive (and perhaps actually dominant) for P1 and takes care that such changes are evident to P2

(f) the union builds up strike fund or enters into swap agreement with other unions

(g) the U.S. (or S.U.) invests in a massive civil defense program (or an ABM system)

2 [less obviously and more perversely] P1 visibly takes actions that reduce the value of L₁ (sometimes “weakness can be [bargaining] strength”)

(a) you “burn your bridges behind you,” so that you can’t retreat and must either fight (stand firm) or be captured

(c) the hostage holders kill one or a few (but definitely not all) hostages (this assumes there are numerous hostages), so that they must expect a worse penalty if the were to give in and be captured [also see below on “decomposing threats”]

(e) the buyer or seller enters into an appropriately designed side-contract (see Schelling, Strategy of Conflict, p. 24)

(f) the union leaders arouse expectations among members (“If we don’t get you a 20% wage boost, you should kick us out of office”)

(g) U.S. puts 5,000 troops in Berlin [also see below on “trip wires” and “the threat that leaves something to chance”]

(i) Israel builds settlements on West Bank, so that it becomes more difficult for them to make future territorial concessions

(i) the U.S. President is negotiating a treaty with another country, which makes a demand the President doesn’t want concede to: his bargaining power is enhanced if he can say “I sorry, but my hands are tied; if I make this concession, I’ll never be able to get the treaty we both want ratified by the Senate”

3. One move of this type is especially important: P1 can invest his long-term reputation in the outcome of the present bargaining situation, thereby (greatly) reducing the value of L₁, quite likely to the point that L₁ is worse than P₁ (“If I give in on the issue, everyone will expect me to give on other issues, so it is clearly in my long-term interests to stand firm now, even if that means getting the bad payoff P₁ in the short-run.”) Such reputation effects may be powerful even if P1 does not deliberately enhance them. Reputation effects make a “this is my last demand” ploy by P2 less likely to succeed.

(b) if P1 plays chicken regularly (and his future opponents are watching) while P2 does not, P1 has the stronger incentive to stand firm, and P1 knows this

(h) JFK’s speech of 10/22/62: Soviet offensive missiles in Cuba “cannot be accepted by this country if our courage and our commitments are ever to be trusted again by either friend or foe”

B. Strategic moves that actually and irrevocably commit P1 to stand firm, by eliminating giving in as a feasible option. (See Schelling, Arms and Influence, Chapter 2 [“The Art of Commitment”] and Dixit and Nalebuff, Chapter Six (“Credible Commitments.”) Such an irrevocable commitment displaces clearly onto P2 the “last clear chance” to avoid mutual punishment by giving in. (It is of course very important for P1 to make sure that P2 sees what P1 has done.)

(a) P1 appoints an instructed agent to negotiate with P2; the agent has no authority to make substantial concessions and cannot communicate with P1

(b) P1 locks his steering wheel in the “straight ahead” position and throws key out the window

(c) the hostage holders rig up a trip-wire system, so that if authorities move in to try to free the hostages, this action will trigger automatic killing of the hostages [this can sustain the hostage holders’ deterrent threat but not a compellent threat]

(g) U.S. troops in West Berlin also served as a trip wire (if they are attacked, killed, or captured, the U.S. will be politically compelled to dispatch reinforcements and risk general war)

(h) US (or SU) installs a “doomsday machine” that will automatically destroy the world if SU’s (or US’s) missiles ever strike US (or SU) territory. (In the Dr. Strangelove movie, the SU installs such machine but makes the mistake of not immediately announcing what it has done.)

1. P1 makes a pre-emptive commitment (to deter P2 from making an irrevocable commitment)

2. P1 “decomposes” the execution of his threat to inflict punishment on P2 (i.e., the threat is carried out gradually)

(c) to sustain a compellent threat, the hostage holders announce they will kill one hostage a day until authorities give in to their demands

(e) Note: a strike or lockout is really the decomposed execution of a threat (collective bargaining continues as each side inflicts gradually increasing punishment on the other)

Note: such “gradualism” can have perverse consequences in bargaining situations; see the discussion of “dollar auction” games below

3. P1 employs a “threat that leaves something chance” (Schelling, Strategy of Conflict, Chapter 8, and Arms and Influence, Chapter 3 (“The Manipulation of Risk”). This means that P1 says to P2: “If you don’t give in, I may or may not carry out my threat to inflict mutual punishment on us — but whether it is carried out or not will be determined, not by my own choice (I know that I will always have an incentive to renege on my threat), but by a chance mechanism that I am now setting in motion.” It is more credible that P1 will set such a random mechanism going than that P1 would deliberately chose to carry out a mutually punitive threat.

(b) to sustain a compellent threat, a single hostage holder with a single hostage (so a decomposed threat is not feasible) announces that he will put one bullet in his gun, spin the bullet chamber, aim the gun at the hostage, and pull the trigger, and repeat this process once a day a day until the authorities give in to his demands

(g) U.S. troops in West Berlin more realistically served as a trip wire that would generate a substantial risk (as opposed to the certainty) of escalation leading to general (even nuclear) war, an outcome the U.S. would presumably never deliberately choose at the outset

(h) one (of many) drawbacks of a “doomsday machine” it that it is totally unforgiving in the event of accidental missile firings; perhaps a doomsday machine should trigger a random mechanism that would destroy the world with some positive probability. (Of course, if the doomsday machine were tested in some accidental incident and it did not destroy the world [to the huge relief of everybody, including the side that installed it], the other side might speculate as to whether the whole thing is a bluff.)