LogFAQs > #947678463

Chicken Knife does have an upper limit, but a high one. It's also about twice as good as its displayed attack power suggests, due to getting a version of the dagger damage formula that isn't bugged. The downside is that, when you attack with the Chicken Knife, there's a chance (~25%) it will make you attempt to run away. It's still the better choice overall.

Aside: Daggers (and some other weapons) are supposed to deal damage based on both Strength and Agility, but the bug makes it so that only Strength really matters (Agility either adds on a little damage or it doesn't, and in some cases, gaining Agility makes it go from "does" to "doesn't".) I don't think any of the ports have ever fixed this, presumably because they'd have to rebalance all those weapons if they did.
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I don't like this duchy. Now, it's an adventurer.