Heterogeneous Groups and the Limits of Cooperation

1. Heterogeneous Groups and the Limits of Cooperation Alastair Smith, NYU

2. Motivations • International Cooperation • Infinite PD • Leader Based Theory • Leader specific punishments • Domestic institutions shape survival • Groups (A & B) • Differential benefit from international cooperation • Preferences over which group rules in other nations

4. Domestic Actors • Treat nation 1 as a unitary actor • Rewards from cooperation, R1 • and from who rules (σ1 for A) • σ1>0 implies proA • Nation 2: Two groups, A and B. • Benefits of international cooperation, RA and RB • Groups benefit differentially from cooperation

5. Domestic Political Competition • selectorate model • Winning coalition W Selectorates SA , SB>W • Office holding worth: Ψ • Prob. ρ next leader from group A • Group benefits σ • Random shock, θ. • Pr(θ<x)=F(x) (use exponential) • Selectorate competition: Leader maximize the value of public and private goods subject to budget constraint (g*,z*)=argmax u(g)+v(z) subject to p g + W z ≤ M

6. Game Form • Leader propose public and private policies to the highest affinity selectors in their group • Revelation of leader 2's stochastic shock, θ. Selectors choose. • Leaders from nation 1 and 2 play the prisoners dilemma interaction. • Record the integrity of nations 1 and 2.

7. Baseline: No Cooperation • E0, A and B all play ~C • Baseline: Existence, reversion point for punishment • Survival: A survives provided that θ≤ θA0

8. Full Cooperation: EQ1 A and B cooperate provided that temptation is not too great ε<τ Once A cheats, 1 refuses to cooperate again. Cheaters can’t provide cooperation so harder to survive --- leader specific punishment Ability to commit to cooperate depends upon institutions

10. Partial Cooperation and Favoritism • E2 – partial cooperation • Cooperation with A leader but not B • E3 – Favor A, cooperate with B • If σ1>>0 (i.e proA) then let A leaders cheat • Cooperate with B • E4 – Favor A, ignore B • If σ1>>0 (i.e proA) then let A leaders cheat • No Cooperation with B

11. Leader Survival • θAH4>θAH3,θAH2>θAH1=θAH0 • ProA and partial cooperation help leader A survive • θBH4<θBH3,θBH2<θBH1=θBH0 • ProA and partial cooperation harm B’s survival

13. If 1 is neutral then like most cooperative equilibria If 1 is proA then tradeoff between maximizing cooperation and promoting preferred group overseas Tradeoff influenced by institutions (ease of replacing leader) Optimal Policies

16. New Dynamics • Patterns of cooperation change with leader turnover • Group in power matters • 1) what cooperation is possible • 2) nations allow favored group to exploit cooperation • Promote group A’s tenure • Aid, non-compliance of IMF agreements • 3) cooperation withheld from disliked groups • Reduce groups B’s tenure • Sanctions

23. Equilibria