GETTING CLOSER TO THE CLIFF. One way to win a chicken game is to be the one who gets closer to the edge. If there is a series of chicken games, each person learns a little more with each game about how close you can go without falling over the cliff. So one possible sequence of chicken games would have each player getting closer to the edge until one falls over. Further, in negotiations by representatives of groups (political parties or labor unions and businesses), each representative wants to demonstrate to its supporters that they fought as hard as they could. Settlements are often announced after all-night bargaining sessions. So there is an incentive in each successive negotiation to hold out longer to show that you were tough. Another complication is that it is hard to know where the cliff is. For example, Tony James, in the article I linked to yesterday, points out that; “Oct. 17 is just a guess of when the government runs out of cash. Look at Treasury’s daily cash balance. It can swing by $50 billion a day.”
Negotiations in the future on raising the debt limit could be increasingly exciting.