According to Videogames Chronicle a sequel to Bully was in development for over a year before it fizzled out. Their sources claim that a script was in development back in 2008 but according to a second source the team had no real idea where to take Jimmy the protagonist of the original Bully game, one of the options they had in mind was to depict him in either high school or college.

The second source states the game was worked on between May 2010 and the last few months of 2013, this means Bully 2 was probably the next game that Rockstar was supposed to release after Red Dead Redemption which came out in 2010. Bully 2 was eventually worked to the point that a playable demo was completed that featured a small open world in the Rockstar Advanced Game Engine. Apparently even with all the work done the game never got off the ground and eventually staff was moved to other projects.

Source: Videogames Chronicle

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