The Autocrat's Credibility Problem and Foundations of the Constitutional State

2008 ◽  
Vol 102 (1) ◽  
pp. 125-139 ◽  
Author(s):  
ROGER B. MYERSON
Keyword(s):  
Moral Hazard ◽  
Multiple Equilibria ◽  
Focal Point ◽  
Third Party ◽  
Theoretic Model ◽  
Moral Hazard Problem ◽  
Constitutional State ◽  
Game Theoretic ◽  
Game Theoretic Model ◽  
Credibility Problem

A political leader's temptation to deny costly debts to past supporters is a central moral-hazard problem in politics. This paper develops a game-theoretic model to probe the consequences of this moral-hazard problem for leaders who compete to establish political regimes. In contests for power, absolute leaders who are not subject to third-party judgments can credibly recruit only limited support. A leader can do better by organizing supporters into a court which could cause his downfall. In global negotiation-proof equilibria, leaders cannot recruit any supporters without such constitutional checks. Egalitarian norms make recruiting costlier in oligarchies, which become weaker than monarchies. The ruler's power and limitations on entry of new leaders are derived from focal-point effects in games with multiple equilibria. The relationships of trust between leaders and their supporters are personal constitutions which underlie all other political constitutions.

Strategic promotion, reputation, and responsiveness in bureaucratic hierarchies

2019 ◽  
Vol 31 (3) ◽  
pp. 286-307 ◽  
Author(s):  
Xinyu Fan ◽  
Feng Yang
Keyword(s):  
Third Party ◽  
Theoretic Model ◽  
Supportive Evidence ◽  
Knowing That ◽  
The Future ◽  
Game Theoretic ◽  
Promotion Strategies ◽  
Game Theoretic Model ◽  
Government Responsiveness

While existing studies usually model promotion as a bilateral interaction between promoter and promotee, it is not uncommon that the promoter is under the influence of a third party. For instance, authoritarian rulers may consider how their interactions with local agents change the way that citizens view them. Similarly, a mid-tier officer in a bureaucratic hierarchy often concerns herself with her image in the eyes of her superior when managing her subordinates. In this paper, we construct a game-theoretic model to investigate promotion strategies when promoters have reputation concerns. We show that promoters can use promotion as a signaling tool, where she can deliberately postpone promoting the subordinate to enhance her own reputation. Furthermore, the promoter has extra incentives to shirk, knowing that she can manipulate promotion in the future. Thus, strategic promotions decrease government responsiveness. Counter-intuitively, such a decrease is more severe when intra-bureaucracy information is more transparent. In other words, transparency may do more harm than good. We conduct a case study of the Chinese bureaucracy and provide supportive evidence.

Group Size and Collective Action

2001 ◽  
Vol 34 (1) ◽  
pp. 63-93 ◽  
Author(s):  
ARUN AGRAWAL ◽  
SANJEEV GOYAL
Keyword(s):  
Collective Action ◽  
Group Size ◽  
Third Party ◽  
Collective Good ◽  
Primary Data ◽  
Theoretic Model ◽  
Game Theoretic ◽  
Distinctive Aspect ◽  
Game Theoretic Model ◽  
Large Groups

This article examines the hypothesis that group size is inversely related to successful collective action. A distinctive aspect of the article is that it combines the analysis of primary data collected by the authors with a game-theoretic model. The model considers a group of people protecting a commonly owned resource from excessive exploitation. The authors view monitoring of individual actions as a collective good and focus on third-party monitoring. We argue that the costs of monitoring rise more than proportionately as group size increases. This factor along with lumpiness in the monitoring technology yields the following theoretical conclusion: Medium-sized groups are more likely than small or large groups to provide third-party monitoring. The authors find that the empirical evidence is consistent with this theoretical result.

State Intervention in Collective Action

2021 ◽  
pp. 33-53
Author(s):  
Calla Hummel
Keyword(s):  
Collective Action ◽  
Multiple Equilibria ◽  
State Intervention ◽  
Theoretic Model ◽  
Negative Externalities ◽  
Informal Workers ◽  
The World ◽  
Game Theoretic ◽  
Game Theoretic Model ◽  
Different Levels

Chapter 2 develops a theory of state intervention in collective action. It argues that as unorganized people create negative externalities, officials increasingly have an incentive to encourage people who organize self-regulating organizations. When officials intervene with cash, licenses, and access to the bureaucracy, they lower the barriers that kept people from organizing on their own. Once informal workers take these incentives and start organizations, officials can bargain over regulation and enforcement with representatives instead of a mass of individuals. The theory builds on contributions from Olson (1965), Ostrom (1990), and Holland (2017). The theory is formalized in a game theoretic model to show that officials and informal workers are strategically linked. The chapter uses the model to demonstrate the exact conditions under which we can expect informal workers’ organizations as a result of officials’ encouragement. The model produces multiple equilibria that reflect the different levels of organization that we observe in informal sectors around the world. The equilibrium conditions generate clear expectations for the patterns that we should see in the empirical chapters if the theory is correct.

Asymmetric Information, Mediation, and Conflict Management

2006 ◽  
Vol 58 (2) ◽  
pp. 207-241 ◽  
Author(s):  
Robert W. Rauchhaus
Keyword(s):  
Quantitative Analysis ◽  
Asymmetric Information ◽  
Conflict Management ◽  
Empirical Support ◽  
Third Party ◽  
Theoretic Model ◽  
New Information ◽  
Effective Form ◽  
Game Theoretic ◽  
Game Theoretic Model

This article examines mediation in conflicts using both a game-theoretic model and a quantitative analysis. The game-theoretic model suggests that mediator effectiveness rests primarily on the ability of third parties to provide critical information about the disputants’ reservation points. The empirical analysis finds that mediation that targets asymmetric information is a highly effective form of conflict management. Moreover, the results suggest that mediation outperforms other forms of third-party intervention, including those that entail coercion. Both the model and quantitative analysis indicate that impartial mediators will generally outperform biased ones. Along with providing new information on conflict management, the quantitative analysis also has broader implications for IR theory. The results provide empirical support for the rationalist claim that asymmetric information is one of the root causes of war.

scholarly journals Motivating Supplier Social Responsibility Under Incomplete Visibility

2020 ◽  
Vol 22 (6) ◽  
pp. 1268-1286 ◽  
Author(s):  
Tim Kraft ◽  
León Valdés ◽  
Yanchong Zheng
Keyword(s):  
Supply Chain ◽  
Social Responsibility ◽  
Investment Decision ◽  
Problem Definition ◽  
Third Party ◽  
Theoretic Model ◽  
Practical Relevance ◽  
Managerial Implications ◽  
Game Theoretic ◽  
Game Theoretic Model

Problem definition: We examine how a profit-driven firm (she) can motivate better social responsibility (SR) practices by a supplier (he) when these practices cannot be perfectly observed by the firm. We focus on the firm’s investment in the supplier’s SR capabilities. To capture the influence of consumer demands, we incorporate the potential for SR information to be disclosed by the firm or revealed by a third party. Academic/practical relevance: Most firms have limited visibility into the SR practices of their suppliers. However, there is little research on how a firm under incomplete visibility should (i) invest to improve a supplier’s SR practices and (ii) disclose SR information to consumers. We address this gap. Methodology: We develop a game-theoretic model with asymmetric information to study a supply chain with one supplier and one firm. The firm makes her investment decision given incomplete information about the supplier’s current SR practices. We analyze and compare two settings: the firm does not disclose versus she discloses SR information to the consumers. Results: The firm should invest a high (low) amount in the supplier’s capabilities if the information she observes suggests the supplier’s current SR practices are poor (good). She should always be more aggressive with her investment when disclosing (versus not disclosing). This more aggressive strategy ensures better supplier SR practices under disclosure. When choosing between disclosing and not disclosing, the firm most likely prefers not to disclose when the supplier’s current SR practices seem to be average. Managerial implications: (i) Greater visibility helps the firm to better tailor her investment to the level of support needed. (ii) Better visibility also makes the firm more “truthful” in her disclosure, whereas increased third-party scrutiny makes her more “cautious.” (iii) Mandating disclosure is most beneficial for SR when the suppliers’ current practices seem to be average.

scholarly journals Strategic aspects of cyberattack, attribution, and blame

2017 ◽  
Vol 114 (11) ◽  
pp. 2825-2830 ◽  
Author(s):  
Benjamin Edwards ◽  
Alexander Furnas ◽  
Stephanie Forrest ◽  
Robert Axelrod
Keyword(s):  
United States ◽  
North Korea ◽  
Strategic Choice ◽  
The United States ◽  
Third Party ◽  
Theoretic Model ◽  
Knowledge Level ◽  
Game Theoretic ◽  
Game Theoretic Model ◽  
Cyber Conflict

Cyber conflict is now a common and potentially dangerous occurrence. The target typically faces a strategic choice based on its ability to attribute the attack to a specific perpetrator and whether it has a viable punishment at its disposal. We present a game-theoretic model, in which the best strategic choice for the victim depends on the vulnerability of the attacker, the knowledge level of the victim, payoffs for different outcomes, and the beliefs of each player about their opponent. The resulting blame game allows analysis of four policy-relevant questions: the conditions under which peace (i.e., no attacks) is stable, when attacks should be tolerated, the consequences of asymmetric technical attribution capabilities, and when a mischievous third party or an accident can undermine peace. Numerous historical examples illustrate how the theory applies to cases of cyber or kinetic conflict involving the United States, Russia, China, Japan, North Korea, Estonia, Israel, Iran, and Syria.

Terrorism and the Problem of Moral Hazard

2020 ◽  
pp. 39-69
Author(s):  
Navin A. Bapat
Keyword(s):  
Moral Hazard ◽  
Energy Market ◽  
Theoretic Model ◽  
Global Energy ◽  
Military Aid ◽  
Perverse Incentives ◽  
Game Theoretic ◽  
Game Theoretic Model ◽  
Political Backlash ◽  
The U.S

Using the logic of a game theoretic model, this chapter argues that the project to cement American dominance over the global energy market failed because the U.S. security guarantee created a series of perverse incentives. Host leaders recognized that they would only receive American support if the threat of terrorism persisted, and that they would receive relatively more economic and military aid if the threat of terrorism became significant. Therefore, these host states had no incentive to disarm their terrorists. As a result, terrorism escalated throughout the energy market in the 2000s, leading to spiraling costs to the U.S. and a political backlash. Pressure mounted on American leaders to begin scaling back the war. To forestall this possibility, and protect the lucrative petrodollar system, the U.S. needed to quickly develop a strategy to force the host states to proactively address the terrorist threats in their territories.

Moral Hazard, Discipline, and the Management of Terrorist Organizations

2011 ◽  
Vol 64 (1) ◽  
pp. 39-78 ◽  
Author(s):  
Jacob N. Shapiro ◽  
David A. Siegel
Keyword(s):  
Moral Hazard ◽  
Equilibrium Strategy ◽  
Theoretic Model ◽  
Terrorist Organizations ◽  
Record Keeping ◽  
Organizational Challenges ◽  
Small Organizations ◽  
Terrorist Groups ◽  
Game Theoretic ◽  
Game Theoretic Model

Terrorist groups repeatedly include operatives of varying commitment and often rely on a common set of security-reducing bureaucratic tools to manage these individuals. This is puzzling in that covert organizations are commonly thought to screen their operatives very carefully and pay a particularly heavy price for record keeping. The authors use terrorist memoirs and the internal correspondence of one particularly prominent group to highlight the organizational challenges terrorist groups face and use a game-theoretic model of moral hazard in a finitely sized organization to explain why record keeping and bureaucracy emerge in these groups. The model provides two novel results. First, in small heterogeneous organizations longer institutional memory can enhance organizational efficiency. Second, such organizations will use worse agents in equilibrium under certain conditions. The core logic is that in small organizations the punishment strategies that allow leaders to extract greater effort are credible only when operatives can identify and react to deviations from the leaders' equilibrium strategy. This dynamic creates incentives for record keeping and means that small organizations will periodically use problematic agents in equilibrium as part of a strategy that optimally motivates their best operatives.

Stability in the informal value transfer systems: norms of trust or institutions of control?

2017 ◽  
pp. 120-130
Author(s):  
A. Lyasko
Keyword(s):  
Social Control ◽  
Institutional Economics ◽  
Theoretic Model ◽  
Transfer System ◽  
Value Transfer ◽  
Partner Interaction ◽  
Game Theoretic ◽  
Game Theoretic Model ◽  
Informal Value Transfer System

Informal financial operations exist in the shadow of official regulation and cannot be protected by the formal legal instruments, therefore raising concerns about the enforcement of obligations taken by their participants. This paper analyzes two alternative types of auxiliary institutions, which can coordinate expectations of the members of informal value transfer systems, namely attitudes of trust and norms of social control. It offers some preliminary approaches to creating a game-theoretic model of partner interaction in the informal value transfer system. It also sheds light on the perspectives of further studies in this area of institutional economics.

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