The right of withdrawal in the treaty of Lison: A game theoretic reflection on different decision processes in the EU

Abstract

The ways of decision making within the EU have significantly changed in the last decades: the rule of unanimity has been more and more substituted by majority voting in order to speed up decision-making processes in a Union of 27 heterogeneous member states. A third possibility is now offered by the Lisbon Treaty including a constitutional right of withdrawal: A member state encountering a loss in its benefits caused by a decision made by majority voting may now demand compensating transfers by using the right of withdrawal: It might threaten to leave the EU if the compensation is denied. Are member states becoming as powerful as they are under the rule of unanimity because they use the right of withdrawal as a threat point? Using a game theoretic approach we show that normally compensating transfers will be lower under majority decisions with exit option compared to decisions requiring unanimity; under certain conditions however transfers could also be as high as in the case of unanimity. In practise, the EU will offer compensating transfers depending on how credible a member state threatens to leave the Union. By using cheap talk a member state may increase the credibility of its outside option and therefore receive higher transfers