As anyone who has read Chapter 16 knows, to win the game of chicken, you commit to going straight, and rely on the other party's self interest to make him swerve. But what happens when each party tries to commit to going straight?
These games typically involve each player trying to influence the final outcome until the very end, when one gives way.
But game theorists warn that in real life, the end game may be one in which neither side concedes. This could happen if each party has committed so much to its uncompromising position, that it becomes impossible for it to change it.
The non-strategic view of bargaining (the alternatives to agreement determine the terms of agreement) offers further insight:
However, opting for forgiveness risks creating dangerous incentives for other countries to act in the same way as Athens. “Germany may decide that if the eurozone does not punish Greece, it will have problems with other countries such as Spain and Italy,” says Roger Myerson, a Nobel-winning economist at the University of Chicago.
Mr Varoufakis should therefore try to convince Germany that Athens’ situation is unique and that other eurozone countries will not seek debt relief as a result, he says. In doing so, he would follow the illustrious precedent of the citizens of Melos, to whom Athens, during the Peloponnesian war between Athens and Sparta, gave the choice of surrendering or facing annihilation.
“The Melians sought to argue that they were different and that sparing them would not set a dangerous precedent vis-à-vis other islands,” says Mr Myerson.
The problem with this strategy, however, is that the other player may choose to build a reputation for toughness. This is what Athens opted for — it laid siege to the island and starved the inhabitants into submission.