Is there a term for simulated irrationality? When 2 rational people want to accomplish their goals, they'll get compromise by meeting their goals halfway. But if one of them seems irrational, his opponent will go much farther in his concessions since he knows there's the risk of him burning everything to the ground.

Therefore, it can be advantegous to seem irrational or insane. Is there a term for behaving in such a manner on purpose?
I don't think there's an official term for this kind of bluffing specifically, that's widely used. But Nixon's approach to the Soviet Union, to act in an exaggerated irrational manner to deter them from provoking the US, is sometimes referred to as the "Madman Strategy".