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A threat, and its counterpart – a commitment, are both defined by American economist and Nobel prize winner, T.C. Schelling, who stated that if: “A announces that B’s behaviour will lead to a response from A. If this response is a reward, then the announcement is a commitment; if this response is a penalty, then the announcement is a threat.”[1]
While a player might make a threat, it is only deemed credible if it serves the best interest of the player. [2] In other words, the player would be willing to carrying through with the action that is being threatened regardless of the choice of the other player. [3] This is based on the assumption that the player is rational. [4]
Examples of non-credible threats
[edit]Market Entry Game
[edit]Economics is great [citation needed]
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[edit]Notes
[edit]- ^ Sun, S., & Sun N. (2018). Management Game Theory. SpringerLink. doi:10.1007/978-981-13-1062-1
- ^ Heifetz, A., & Yalon-Fortus, J. (2012). Game Theory: Interactive Strategies in Economics and Management. Cambridge University Press. ProQuest Ebook Central
- ^ Schelling, T. C. (1956). An Essay on Bargaining. The American Economic Review, 46 (3), 281 – 306. https://www.jstor.org/stable/1805498
- ^ Sun, S., & Sun N. (2018). Management Game Theory. SpringerLink. doi: 10.1007/978-981-13-1062-1