Geoffrey Hale
Political Science 3170
University of Lethbridge
September 24, 2010
Game Theory and International
Negotiations
 Basic concepts
 “Win-sets”, negotiating room, and negotiating leverage
 Making agreements “stick”
 Voluntary and involuntary defection
 Factors affecting “win set” size
 Why it matters
 Examples and applications
Basic Concepts: Two-Level Games
 Theory holding that international negotiations involve
bargaining on at least two levels
 between or among national governments, and
 between government leaders (or negotiators) and other domestic
political actors including
 actors within their own governments and/or
 actors among relevant societal groups.
 Successful negotiations require:
 agreement between negotiators / countries on the basis of mutual
(but not necessarily equal) benefit;
 capacity of each government secure internal ratification of the
agreement according to its relevant (private or public) political
processes.
Basic Concepts: Two-Level Games
Level 1 Game
Country “A”
Country “B”
Political leader
---------------------- Political leader
and senior advisors
and senior advisors
|
|
Level 2 Game
Level 2 Game
Country “A”
Country “B”
Political leader / sr. negotiator
Political leader / sr. negotiator
+++++++++++++++++++++++
+++++++++++++++++++++
Internal political / b’cratic actors
Internal polit. / b’cratic actors
+++++++++++++++++++++++
+++++++++++++++++++++
External political / societal actors
External political / societal actors
(supportive / conditional / opposed)
(supportive / conditional / opposed)
Key assumptions
 States are not unitary actors in negotiations
 Negotiators’ preferences, bargaining conditions are not
fully transparent
 Implications
 Critical to have understanding of other parties’
negotiating contexts, priorities, especially in multi-party
negotiations. (Easier said than done.)
Key Assumptions II
 States are not unitary actors in negotiations
 Negotiators’ preferences, bargaining conditions are not
fully transparent
 Bargaining environment may be dynamic
 subject to change based on external political or policy
environments for negotiations, or based on internal
dynamics (winners / losers / unforeseen issues) of
negotiations themselves.
 Implications
 Negotiations not “over” until everyone agrees.
 Agreement does not necessarily imply ratification.
Key assumptions III
 Negotiators may use bargaining dynamics to influence their own
domestic actors BUT
 Domestic political institutions play vital role in structuring internal
dynamics of initiating, conducting, and/or ratifying international
institutions.
 Ratification processes may be formal, public OR private, internal to
government (or branches of government) OR combination of both
 Implications:
 Usually multiple agendas present at bargaining table.
 Negotiations may involve element of “bluff” involving leaders’
capacity to mobilize domestic support, overcome opposition
(internal and external).
 Political leaders with greater domestic autonomy may be at relative
disadvantage compared with more politically constrained
negotiating counterpart.
Key assumptions IV
 States are not unitary actors in negotiations
 Negotiators’ preferences, bargaining conditions are not fully
transparent
 Bargaining environment may be dynamic
 subject to change based on external political or policy environments for
negotiations, or based on internal dynamics (winners / losers /
unforeseen issues) of negotiations themselves.
 Negotiators may use bargaining dynamics to influence their own domestic
actors BUT
 Domestic political institutions play vital role in structuring internal
dynamics of initiating, conducting, and/or ratifying international
institutions.
 Domestic actors in each country may attempt to take prior
or ongoing political actions to change terms on which
negotiators are likely to be able to ratify any agreement.
“Win-sets”
 The collection or set of agreements among negotiators
that would obtain ratification by their respective
constituents in an “up-or-down” vote.
 Win-sets for each “Level 1” party must overlap
 The smaller the win-sets for each party, the greater the
likelihood that negotiations will break down.
“Win-sets” II
 The collection or “set” of agreements among
negotiators that would obtain ratification by their
respective constituents in an “up-or-down” vote.
 Win-sets for each “Level 1” party must overlap to some
degree
 The smaller the win-sets for each party, the greater the
likelihood that negotiations will break down.
“Win-sets” III
 The relative size of each country’s “win-sets” will affect the
distribution of the joint gains from the international bargain.\
 Negotiators with smaller win-sets can use risk of non-ratification
to shape process of negotiation, extract more concessions from
countries with larger “win-sets”
 Size of win-sets may be shaped by government’s relative
autonomy from domestic political interests, perceived gains
from agreement vs. non-agreement, perceived costs of not
securing agreement.
Xm-------------[--------[--------]-------[---------------Ym
Y1
Y2
X1
Y3
Max. possible
Max. possible
gains for X
gains for Y
“Win-sets” IV
 Scope of negotiations will affect size of “win-sets”
 Broad negotiations among relatively limited number of
parties increases potential for trade-offs, bargains
leading to agreements.
 The growing in the number of negotiating parties
increases the difficulties in achieving agreement on
large-scale agreements


Multi- or plurilateral agreements more likely to be achievable
on more narrowly focused issue clusters (fewer ‘external’
linkages)
Explains specialization, decentralization of international
economic institutions
Key factors affecting size of “win-sets”
“Level 2” Preferences and Coalitions
 Distribution of political, societal interests actively or
conditionally in favour of, opposed to potential agreement
 relative size of enthusiastic “internationalist” coalition vs.
resolutely “nationalist” or “isolationist” coalitions
 relative homogeneity vs. diversity of domestic interests
potentially affected.
 interests may exist independently in each country or
cooperate across national borders.
 Relative intensity of coalitions likely to gain or lose from
agreement.
 Capacity of governments to negotiate trade-offs to neutralize
or reconcile potential opponents
Key factors affecting size of “win-sets”
“Level 2” Preferences and Coalitions II
 “The lower of the costs of non-agreement (status quo)
to constituents, the smaller the ‘win sets’”
 More self-sufficient states usually have lower costs of
non-agreement than trade dependent states.
 If political influence of supporters, opponents
relatively equal, political contest may be determined
by relatively unaligned groups “in the middle”.
Key factors affecting size of “win-sets”
“Level 2” Institutions
 How transparent?
 Secrecy may be advantage – but only if societal
ratification of secondary importance to outcomes.
 Consultation may be vital for mobilization of /
validation of outcomes by key stakeholder groups.
Key factors affecting size of “win-sets”
“Level 2” Institutions II
 Who has veto points, and at what stages of process?
 Centrality of “Fast Track / Trade Promotion Authority”
in securing ratification by U.S. Congress


Support still requires support from key Congressional leaders,
often on both sides of House, Senate.
Differences between “Treaty”, “Executive Agreement”
 Importance of provincial support as “cover” for federal
trade negotiations in Canada.
 The stronger the autonomy of a (democratic) state, the
weaker its international negotiating position.
Key factors affecting size of “win-sets”
Level I Negotiators’ Strategies
 Management of domestic expectations, fears key factor
in balancing leverage on negotiating partner(s) with
capacity for ratification.
 Total gains / losses from negotiations often less
important than their distribution among actual and
potential coalitions of supporters and opponents.
 Negotiations more likely to succeed when negotiators
“collude” in managing relative costs and benefits of
potential agreement.
Managing “game breakers”,
risks of “defection”
 Uncertainty, inadequate political / technical research often
critical factors in managing negotiations.
 Negotiators often “bluff” in order to convince counterparts that
their “win-sets” or “kinky” – reflecting limited capacity to sell
compromises past specific point.
 Involuntary defection – a negotiator or leader is unable to secure
ratification of an agreement
 May result from informal political processes (being overruled by
political superiors or colleagues) or formal political processes
(legislative or electoral defeat).
 e.g. Negotiations with U.S. government subject to ratification by
Congress with independent powers, multiple veto points
empowered by decentralized decision-making system.
Managing “game breakers”,
risks of “defection” II
 Voluntary defection – the reneging on a bargain by a
“rational egoist” in the absence of enforceable contracts.
 Less likely when likelihood of repeated negotiations on
different subjects creates incentives for the cultivation of trust
among political and bureaucratic actors.
 Good faith may be reinforced by potential for political,
diplomatic or economic costs.
Summary
 “Two-level” game theory provides general model for
analysis of international negotiations
 BUT – use as predictive model depends on the number
of separate factors, actors involved in negotiations,
ratification AND
 Capacity of negotiators, policy analysts to identify
accurately the key members of stakeholder coalitions,
their priorities and conditions for ratification in highly
dynamic, uncertain game.