Signaling games help explain political crises, but they often have multiple possible outcomes. This creates a problem for using theory with data.
The Problem:
Multiple equilibria make likelihood calculations unclear and discontinuous even if the game itself has one clear outcome.
Our Experiments Show:
Current estimation methods fail to find correct parameters in crisis-signaling games, despite large samples or unique equilibria.
Proposed Solutions: Three New Estimators
These new approaches overcome these limitations and perform better than existing ones. We tested them on data about economic sanctions.
Crucial Findings: Our analysis reveals a previously unnoticed U-shaped relationship between audience costs and leaders' willingness to threaten sanctions, showing the complex reality that simpler models miss.
