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Brexit: Brinkmanship and Compromise

Abstract : We study how door 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.
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Preprints, Working Papers, ...
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https://halshs.archives-ouvertes.fr/halshs-03225030
Contributor : Caroline Bauer <>
Submitted on : Wednesday, May 12, 2021 - 10:34:40 AM
Last modification on : Saturday, June 5, 2021 - 3:38:49 AM

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  • HAL Id : halshs-03225030, version 1

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Helios Herrera, Antonin Macé, Matias Nùnez. Brexit: Brinkmanship and Compromise. 2021. ⟨halshs-03225030⟩

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