Cheap Talk, Costly Feuds: A Pricing Theory of Status and Conflict

A hotel manager once told a marathoner he could run a six-minute mile. The marathoner — who had raced twenty-six miles at 7:35 pace and knew exactly what a six-minute mile costs a body — called bullshit. The manager didn’t retreat to “well, in high school.” He doubled down. Nothing about that exchange makes sense if you think the claim was about running. Everything about it makes sense if you think the claim was a price, quoted in a market where the manager had correctly bet no one would ever demand delivery. This essay argues that status claims and physical threats are the same instrument read at different settings, and that both are priced on three variables: the probability a claim gets settled, the cost if it does, and the horizon over which exposure runs. The three are not parallel. Settlement probability and cost are rates — they run over time — and the horizon is the window they accumulate across. A claim’s price is its expected exposure: the settlement hazard times the cost at…