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The Complete Idiot's Guide to Game Theory by Edward Rosenthal, Ph.D., Edward C. Rosenthal

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Threat Strategies

Keep in mind that the whole point of studying signaling is to understand how one’s actions communicate useful information to the other player. Holding a college degree is one kind of signal. Setting a price for an item to be sold is another. A simple and cheap way to send a signal is to just talk to the other player—but you already know that talk is cheap and is not likely to be reliable.
But what about sending a negative signal, say, a threat? In principle this doesn’t sound any different, communication-wise. But what if the threat involved some sort of risk, something uncontrollable?

Brinkmanship

Brinkmanship relies on an equally nuanced signal as costly commitment goes, but using sticks instead of carrots. The idea is ...

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