Educational Labor Strikes and the Game of Chicken

To understand the rationale behind these seemingly “irrational” labor strikes, let's first examine the Game of Chicken with a classic macroeconomic model: The Nash Equilibrium. 

In short, a Nash Equilibrium helps us understand the best course of action for both parties based on the outcomes. To understand further, let's take an example of 2 people playing a Game of Chicken, with red corresponding to the actions and outcomes for Player A and blue corresponding to Player B. The table above can help us see the utility values (numbers that represent the total benefit from an action or choice) that each individual receives based on a given outcome. Quickly, we can come to four major conclusions:

1. There are two Nash Equilibriums
By tracing the rationales of the two players, we can see that there are two “best” courses of action. If Player A expects Player B to swerve, they will maximize utility by not swerving. On the other hand, if A expects B to charge on, then A should swerve. The potential outcomes are the same for Player B, leaving the upper right box and the lower left box as the most likely outcomes. 

2. Each individual has a different preferred equilibrium
Building off conclusion one, we can see how each player would prefer a different Nash Equilibrium. Player A would find their best outcome to be in the bottom left box, and Player B would find their own in the top right box. This conclusion’s importance will become more apparent when we look at the application of Chicken in labor strikes. 

3. One “off” equilibrium is worse off for both individuals
An off-equilibrium is a cell in our table that is not considered a Nash Equilibrium. In this case, the bottom right is an outcome that has undesirable utility outcomes for both parties. 

4. The other off-equilibrium is better for the loser
In our final cell, the top left, we see that whoever would be the loser of this game would much rather end up in this cell and walk away with 0 utility instead of -5.

These last two conclusions about the Game of Chicken differentiate it from other game theory scenarios, such as the Battle of the Sexes and the Prisoner’s Dilemma. Through these four outcomes, we can start to see the justification behind labor strikes.

Almost all labor-employment relationships for higher education institutes find a balance between the compensation of the workers and the benefits the school receives. However, because of recent shifts against longer tenure periods to weed out overly comfortable, underperforming professors, there has been a greater reliance on contingent faculty and graduate students to help manage classes.⁶ 

A breakdown of the California State University system illuminates this issue.⁷ In that chart, we can see a decrease from a tenure density of 66.6% to 54% between 2004 and 2021, even though there were nearly 80,000 new students. To add to these issues, instead of colleges taking action to help their employees address increased inflationary pressures and worries about job security, many have instead seized this as an opportunity to drive down labor costs. In the context of Chicken, we can compare the college to Player A driving gas to the pedal. They are hoping for the outcome to be the bottom left, and expect the faculty members to simply accept these practices and “chicken out.” 

Of course, this treatment can only last for so long. If the professors and faculty decide to also step up through the use of strikes, the outcome of the bottom right cell, where both sides suffer, becomes an increasing threat.

In short, we can rationalize the behavior of labor strikes as such: colleges (who we are referencing as Player A in our table) assume that teachers and faculties will simply give in to their practices and hope for the Nash Equilibrium outcome in the bottom left. However, the dissent from teachers eventually boils down to labor strikes threatening large-scale class shutdowns. If we assume the faculty and teachers to be Player B, we can see how they are pushing for the Nash Equilibrium in the top right. 

In the context of “Chicken,” a successful educational strike is one where the college eventually gives in to the demands of the faculty, thus “chickening out” of the game. Both parties hope to reach their Nash Equilibrium, with the looming risk of the disastrous bottom right cell eventually bringing the game to a conclusion at equilibrium. But, with two contrasting goals that have seemingly equal possibilities, how can we determine which outcome is more likely in an educational labor strike?

To conclude this game, we need to look at the ideas of 3rd party negotiations and time pressure.

In almost all economic models that involve utility, including our Game of Chicken, utility becomes “discounted” over time. This can be simplified by thinking about an upcoming cellphone you may want to buy. Buying a cellphone today would yield you more utility than if, say, you bought it in 100 days. In the context of negotiations, dragging out resolutions will only harm the utility of both sides: colleges will have to keep their classes shut down and faculty will go unpaid. To bring a sense of time pressure and urgency toward peaceful resolutions, 3rd party negotiations come in. To understand this process, we can trace the resolutions of the 2023 USC labor strike to see how their Game of Chicken unfolded.

Looking at USC’s recent 2023 labor strike timeline, we can see how tensions began building up earlier in the year.⁸ From February to November, factors such as inflation and increased rent costs eventually culminated in many USC graduate teacher assistants demonstrating their determination to go on strike.⁹ Eventually, USC themselves came forward to offer a neutral 3rd-party mediation. Given that this was the first-ever negotiation of contracts, we can see how USC became the “chicken” here and gave in to the demands of the graduate students in good faith. With threats of never-seen-before class shutdowns only escalating over time, USC had much more to lose in this situation and chose to be the one to “swerve.” But, although the events on the campus of USC found a positive resolution, it is also important to look at scenarios where both sides decide not to back down.

Since educational labor strikes and any Game of Chicken have two Nash Equilibriums, understanding their extent of effectiveness requires us to think beyond our framework. 

Currently, two equilibriums are created in a Game of Chicken due to those cells being much more favorable than the off equilibriums. However, this situation changes when the utility values become variable. By doing more analysis into what each side has to lose or gain, we can start to model out case-by-case frameworks that can help us predict courses of action. In the case of the USC strike, the faculty were already pushed to such low wages and conditions that they didn’t have much else to lose. On the other hand, USC found themselves able to give more leeway with their resources, as evidenced by the generous contract offers.  

We can apply this thinking to the other cells of our table. Since humans tend to be very risk and loss-averse, the looming threat of the bottom right cell with higher stakes can result in huge changes to outcomes. In the context of educational labor strikes, both sides will often agree on a resolution or yield if they see their problem escalating to the breaking point. After all, it would be disastrous for faculty members to be out of their jobs for extended periods, both for the teachers themselves, and the institution.

At the end of the day, the outcome of the game of Chicken largely relies on discretion and perceived stakes that are on the line for both sides. While the equilibrium is slowly tipping back into place for educational workers, there will soon come a time when Nash’s outcome will shift again in favor of the private interests of institutes. For now, though, we can continue learning about this behavioral framework of Chicken to understand when strikes may be necessary for making reforms to the education system as a whole.