IS GREXIT A CHICKEN GAME? (COMMENT). I posted recently on the new negotiations between Greece and the European Union, and Dick Weisfelder commented here that the new Grexit crisis possibly should not be considered a chicken game because the two parties (the European Union and Greece) are so different in strength. I had used the term “chicken game” for two reasons. The first is that journalists use it a lot because the convenience of the term is appealing. The second is that the scale of the threats each party can impose on both of them is enormous.
However, despite the seriousness of the threats, I have posted on both the debt ceiling chicken games and the Eurozone chicken games before, and all of them have been resolved so far without any of the massive threats being carried out. In the current Grexit crisis, as in the other games, there are many variables on which trade offs can be made and agreement can be reached. Loans can be extended and loan conditions modified.
Dick wonders whether some of the moves by Greece are hard to understand—like “otherwise incomprehensible Hamas rocket attacks on Israel”. He suggests that the sides are of such disparate strength that the game is like an “underdog” game “where a desperate far weaker player, at great cost to itself, challenges the stronger player.”
A couple of the moves by the new Greek government do seem to me to be incomprehensible if Greece is seeking a negotiated settlement. Reversing previous promises and threatening vetoes on European Union foreign policy issues seem to me to be extremely risky, but maybe they are both ways of showing how desperate and unwilling to compromise the smaller party is.
The problem with overusing the term “chicken” is that the game has distinct characteristics that distinguish it from other games. Should we provide military aid to Ukraine? Are we playing “chicken,” “prisoners dilemma” or something else? That determines the matrix of risks and benefits for the players. During the cold war, the nuclear stalemate clarified that issue. Russia remains a nuclear power; Putin looks like he’s presently playing “chicken” (or is it “underdog” given the state of the Russian economy?). Where does that lead? They say Obama invariably asks “What’s next?” when military options are presented to him. That’s exactly what a risk averse player should do in most real world games.