Why Escalation Happens
The Ukrainian crisis is officially below-the-fold now, as what began with large-scale actions—the appearance of Russian troops in Ukraine, the annexation of Crimea—becomes day-to-day, piece-by-piece escalation toward actual war as Ukrainian forces spar with pro-Russian separatists: downed helicopters, gunfights over checkpoints and bridges, kidnappings, and the apparent torpedoing of a Russian/Ukrainian de-escalation agreement. All in all, it's a bad scene and it's difficult to come up with a "winning" situation for anyone involved, no matter the outcome.
What would be rational for the various different players in the current crisis? What reduces violence, economic harm, and regional instability? These are considerations that would seem to demarcate rationality in Ukraine, though the direct players are so far more interested in other, less rational things, like nationalism, stand-making, ethnic dividing, and rhetoric. The conflict's news cycle might be becoming more atomized and routine—more of a map than a headline—but game theory (and psychology generally) tell us that we're at the absolute critical moment for a rational outcome, if not past it already.
Escalation, generally, is the realm of cognitive bias, e.g. a mode of thinking that skews from good judgement and rationality. Judgement becomes fixated on past outcomes rather than future outcomes: I have already done this, therefor I should do this, rather than, If I do this, the outcome will be bad. It's an ego thing, an overpowering resistance to being seen as a failure. If you had x number of dollars to spend on an outcome and you had a choice between two different outcomes, one better and one worse, rather than spend the money on the better outcome, you would be more likely to spend money on whichever outcome you'd already spent money on, even if it's worse. This is called the "sunk-cost effect" and it's sort of the essence of escalation, whether it appears during the run-up to war or in a casino.
An interesting example of the effect is seen in the NBA. A study released in 1995 courtesy of some Cornell researchers looked the relative draft cost of different basketball players (first pick being the most expensive and so on) and how much time they spent on the court playing in games vs. time spent on the bench. Rational decision making would have the most productive (best) players getting the most on-court time, regardless of what pick they were in the draft, but the Cornell team found that draft pick rank was having a disproportionate effect on how much time players spent playing.
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