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Chad Rector George Washington University Federations and International Organizations Puzzle

Chad Rector George Washington University Federations and International Organizations Puzzle Cooperation and Commitment Contrived Symmetry Case study: Australia. Puzzle. Puzzle. 1850s – independence 1860s – tacit cooperation 1880s – failed international organization

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Chad Rector George Washington University Federations and International Organizations Puzzle

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  1. Chad Rector • George Washington University • Federations and International Organizations • Puzzle • Cooperation and Commitment • Contrived Symmetry • Case study: Australia

  2. Puzzle

  3. Puzzle • 1850s – independence • 1860s – tacit cooperation • 1880s – failed international organization • 1890s – federal constitution (1901)

  4. 2. Cooperation and Commitment

  5. 2. Cooperation and Commitment Payoff to A Payoff to B

  6. 2. Cooperation and Commitment Cooperation Payoff to A No cooperation Payoff to B

  7. 2. Cooperation and Commitment Cooperation Payoff to A No cooperation Payoff to B

  8. 2. Cooperation and Commitment Bargaining space Payoff to A No cooperation Payoff to B

  9. 2. Cooperation and Commitment Negotiated outcome Payoff to A No cooperation Payoff to B

  10. 2. Cooperation and Commitment Limits of bargaining Payoff to A No cooperation Payoff to B

  11. 2. Cooperation and Commitment Negotiated outcome Payoff to A No cooperation Payoff to B

  12. 2. Cooperation and Commitment • Relationship-specific asset: Investment whose return depends on the nature of a relationship • Wal-Mart and contractors • Taiwan and U.S. defense suppliers • Adaptation to ally or market niche

  13. 2. Cooperation and Commitment Negotiated outcome (Nash Bargaining Solution) Payoff to A No cooperation Payoff to B

  14. 2. Cooperation and Commitment Negotiated outcome Never start cooperation in the first place Payoff to A Payoff to B

  15. 2. Cooperation and Commitment Negotiated outcome Never start cooperation in the first place Payoff to A Cooperation starts, then ends Payoff to B

  16. 2. Cooperation and Commitment Negotiated outcome Never start cooperation in the first place Payoff to A Cooperation starts, then ends Payoff to B

  17. 2. Cooperation and Commitment Negotiated outcome Never start cooperation in the first place Payoff to A Cooperation starts, then ends Payoff to B

  18. 3. Contrived Symmetry

  19. 3. Contrived Symmetry Negotiated outcome Never start cooperation in the first place Payoff to A Cooperation starts, then ends Payoff to B Create exit costs

  20. 3. Contrived Symmetry Negotiated outcome Never start cooperation in the first place Payoff to A Cooperation starts, then ends Cooperation starts, then ends, and institution costly to leave Payoff to B

  21. 3. Contrived Symmetry • Institutions that create exit costs • Federal party systems • Military / bureaucracy • Identity

  22. 4. Australia

  23. 4. Australia • 1850s – independence • 1860s – tacit cooperation • 1880s – failed international organization • 1890s – federal constitution (1901)

  24. 4. Australia • New South Wales: • Global trade, agriculture • Free-trade coalition • Victoria: • Regional trade, manufactures • Protectionist coalition

  25. 4. Australia • New South Wales:Prefers IO • Global trade, agriculture • Free-trade coalition • Victoria: Prefers Federation • Regional trade, manufactures • Protectionist coalition

  26. 4. Australia Average tariffs Victoria New South Wales

  27. 4. Australia Regional trade / total trade New South Wales Victoria New Zealand

  28. Conclusion • States choose federation instead of IO when: • Large gains from cooperation • Large, and unequal, relationship-specific assets

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