The Domestic Politics of International Cooperation: Germany and the European Debt Crisis

AbstractInternational cooperation can fail even though governments have no distributional conflicts or incentives to free-ride, face no informational or credibility problems, and even agree on the policies that need to be implemented. Germany's refusal to cooperate with the Eurogroup members on the Greek bailout in 2010 until the crisis threatened to derail the entire Eurozone is puzzling in that regard especially because Germany is the main beneficiary of the euro. It was alleged at the time that this was a dilatory tactic designed to postpone a domestically unpopular decision until after crucial regional elections. But why would voters allow themselves to be misled like that? And why did Merkel agree to the bailout before the elections took place? To analyze how citizen preferences affect international cooperation, we develop a game-theoretic model of the four-way interaction between two governments that must coordinate a response to a crisis affecting both countries but who also must face the polls domestically with an electorate that might be uncertain whether a response is necessary. We find that, paradoxically, governments that stand to receive the greatest benefits from international cooperation face the greatest obstacles to implementing the required policies even when voters would want them to. We show how the model can rationalize Merkel's electoral strategy and why her party suffered at the polls when the strategy went off the rails.</jats:p

Borrowed Power: Debt Finance and the Resort to Arms

Military expenditures are often funded by debt, and sovereign borrowers are more likely to renege on debt-service obligations if they lose a war than if they win one or if peace prevails. This makes expected debt service costlier in peace, which can affect both crisis bargaining and war termination. I analyze a complete-information model where players negotiate in the shadow of power, whose distribution depends on their mobilization levels, which can be funded partially by borrowing. I show that players can incur debts that are unsustainable in peace because the opponent is unwilling to grant the concessions necessary to service them without fighting. This explanation for war is not driven by commitment problems or informational asymmetries but by the debt-induced inefficiency of peace relative to war. War results from actions that eliminate the bargaining range rather than from inability to locate mutually acceptable deals in that range

Mutual Optimism as a Rationalist Explanation for War

Blainey (1988) argued that crises are more likely to end in war when two nations disagree about their relative power. Fey and Ramsay (2007) claim that this widely used “mutual optimism” explanation is theoretically incoherent. Their criticism neglects the need to specify a behavioral causal mechanism that links beliefs to the outbreak of war. We show how the rationalist game-theoretic work on the causes of war provides such mechanisms: the risk-return trade-off and costly signaling, and demonstrate that these models are immune to Fey and Ramsay’s critiques. We also show that the class of models Fey and Ramsay propose make the substantively unwarranted assumption that an actor can unilaterally impose peace on an opponent who strictly prefers war. Their finding that war does not occur in equilibrium has nothing to do with mutual optimism. We conclude that the mutual optimism explanation can be grounded on firm rationalist foundations

On the equilibrium of query reformulation and document retrieval

In this paper, we study jointly query reformulation and document relevance estimation, the two essential aspects of information retrieval (IR). Their interactions are modelled as a two-player strategic game: one player, a query formulator, taking actions to produce the optimal query, is expected to maximize its own utility with respect to the relevance estimation of documents produced by the other player, a retrieval modeler; simultaneously, the retrieval modeler, taking actions to produce the document relevance scores, needs to optimize its likelihood from the training data with respect to the refined query produced by the query formulator. Their equilibrium or equilibria will be reached when both are the best responses to each other. We derive our equilibrium theory of IR using normal-form representations: when a standard relevance feedback algorithm is coupled with a retrieval model, they would share the same objective function and thus form a partnership game; by contrast, pseudo relevance feedback pursues a rather different objective than that of retrieval models, therefore the interaction between them would lead to a general-sum game (though implicitly collaborative). Our game-theoretical analyses not only yield useful insights into the two major aspects of IR, but also offer new practical algorithms for achieving the equilibrium state of retrieval which have been shown to bring consistent performance improvements in both text retrieval and item recommendation

Mutual optimism and war

W hy do states fight costly wars when less costly negotiated settlements are possible? Must there not be some mutually agreeable alternative to war that can produce the same result without incurring the social loss? Could not decision makers agree to distribute the disputed territory or assets in a way consistent with their beliefs about the likely outcome of conflict, saving both sides significant death and destruction? In this article, we address one specific rationalist answer to these questions. As Blainey (1988) intimates, the high hopes on the eve of war suggest a sad conclusion: wars only occur when both rivals believe they can achieve more through fighting than through peaceful means. How might this be so? Obviously, when two countries are involved in a war, if one side wins then the other loses. We might then conclude that at least one side, in particular the loser, would prefer some peaceful method of resolving the dispute if she were certain of the outcome. But war is an uncertain process. Given this uncertainty, the leaders of the two countries must each form expectations about the results of a conflict to guide their decision making. The Mark Fey is associate professor of political science, 109E Harkness Hall, University of Rochester, Rochester, NY 14627 (mark.fey@ rochester.edu). Kristopher W. Ramsay is assistant professor of politics, 033 Corwin Hall, Princeton University, Princeton, NJ 08544 ([email protected]). Earlier versions of this article were presented at the University of Rochester, Columbia University, and NYU. We thank Scott Ashworth, Bruce Bueno de Mesquita, Songying Fang, Tanisha Fazal, Erik Gartzke, Shigeo Hirano, Adam Meirowitz, John Patty, Pablo Pinto, Robert Powell, Quinn Ramsay, Anne Sartori, Curt Signorino, Branislav Slantchev, Allan Stam, Randy Stone, and Robert Walker, as well as other seminar participants. We would also like to thank the editor of the AJPS and two anonymous reviewers for helpful comments. Any remaining errors are our own. Kris Ramsay acknowledges financial support from NSF grant SES-0413381

Tying the Hands of its Masters? Interest Coalitions and Multilateral Aid Allocation in the European Union

ABSTRACT This paper provides a political economy theory of multilateral aid allocation. We argue that the allocation of multilateral aid depends on the heterogeneity of its member states&apos; interests as well as on the formation of interest coalitions which can overcome the collective action problems inherent in intergovernmental bodies. Whereas member states delegate aid to multilateral institutions in order to signal neutrality of aid allocation to their domestic populations, states have an incentive to covertly bias the multilateral allocation process towards their strategic interests. When member states&apos; preferences over aid allocation are heterogeneous, the multilateral aid agent can implement multilateral aid according to its organizational goals. However, greater homogeneity of members&apos; goals increases the likelihood that members can form powerful interest coalitions and successfully loosen the grip of their ties, and induce the multilateral aid agency to allocate aid according to their strategic interests. We apply our general theory to multilateral aid allocation in the European Union, the most dominant multilateral aid donor in the world over the last decade. The empirical analysis provides robust support for our theoretical argument