credible threat

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A threat that the maker is expected to carry out. A's threat to B is that if B acts in certain ways, A will harm B. This threat is credible only if it is rational for B to believe that A will carry it out; if the threatened action also harms A, the threat will not seem credible to B. This holds unless B believes that A will feel that loss of credibility from failure to carry out the threat is even worse than the direct effects of the action itself. A reputation for ruthlessness or even irrationality thus makes threats more credible.

Subjects: Economics.

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