QR 38 3/22/07, Strategic moves and structure-induced equilibria I. Strategic moves II. Credibility

1. QR 38 3/22/07, Strategic moves and structure-induced equilibria I. Strategic moves II. Credibility III. Strategic moves as institutional choice

2. Consider the problem of deterrence by an irresolute defender. What could this defender try to do to deter? I. Strategic moves SQ 2, 3 Refrain War 1, 1 Respond Challenger Attack Acquiesce Defender Concede 3, 2

3. Two options: • Commit to responding in case of attack, eliminating a branch of the game tree • Change payoffs, for example by focusing on reputation Making deterrence credible

4. These are examples of strategic moves: attempting to change the rules and structure of a game to your own advantage. • This means adding a new stage to the game, with the actor making the strategic move going first. Strategic moves

5. Three types of strategic moves. Credibility is always an issue. • Commitments • Threats • Promises Types of strategic moves

6. The player making the strategic move goes first. Need to be more precise about what this means: • The first move must be observable and irreversible. • If not observable, won’t make any difference; like moving simultaneously • If reversible, just back to playing the original game. Who makes the strategic move?

7. Commitments are unconditional strategic moves. • Means saying that in the second stage of the game, I will definitely make a particular move (e.g., respond in a deterrence game). • This is logically the same as changing the order of moves; e.g, as if the defender goes first. Unconditional strategic moves

8. Deterrence, defender can make commitment SQ 3, 2 R War 1, 1 C Commit A D Respond SQ 3, 2 D R C War 1, 1 No R D A Acq Con 2, 3

9. Deterrence with commitment SQ 3, 2 Refrain C Respond Attack W 1, 1 D SQ 3, 2 Refrain Acq C Attack Concede 2, 3

10. Conditional (or contingent) strategic moves mean announcing a response rule or reaction function. • E.g., if B chooses Y1, A will do Z1; if B chooses Y2, a will do Z2, … Conditional strategic moves

11. Conditional moves will only work for A if: • A can wait until after B has moved to respond • A can observe B’s move • B’s move is irreversible • Conditional moves can be used to deter (deterrence) or compel (compellance). Conditional moves

12. Conditional moves can take the form of threats or promises. • A threat says that unless B moves as A desires, A will impose a cost on B. • A promise says that if B does as A desires, A will provide a reward to B. Conditional moves

13. Credibility problems are inherent to both threats and promises: • If credibility weren’t at stake, the move wouldn’t fit the definition of a threat or promise as a conditional move. • E.g., if a deterrent threat were credible because the defender was unhappy with the SQ and planning to fight a war anyway, B would know that fighting was inevitable and the threat wouldn’t have deterrent value. II. Credibility

14. Threats must be costly to both parties • True strategic moves cause mutual harm. • A threat is an implicit promise not to take a costly action if the other party behaves as desired. • Both the threat and the implied promise must be credible. Credibility

15. Analysis of threats demonstrates that sometimes reducing the options available to you is to your advantage. • For example, saying that a defender will always respond to an attack eliminates the acquiesce branch of the game tree and is beneficial to the defender • This insight runs against the conventional wisdom of diplomacy, which stresses the importance of flexibility Tying hands

16. Similar analysis applies to promises: • They must be costly for the promiser to carry out • They imply a threat • So they have the same credibility problems as threats • E.g, consider U.S. offer of aid to Turkey to use its bases for the war in Iraq. If it weren’t costly for the U.S. to provide this aid, Turkey would get the money regardless of whether it cooperated, and the promise would be ineffective. Promises

17. Two general methods for creating credibility are: • Giving up freedom to act • Changing payoffs • Examples involve making an unconditional commitment Creating credibility

18. Giving up freedom to act: Chicken example D No J Commit

19. Changing payoffs Chicken example D No J Put reputation on the line

20. Unconditional commitments aren’t likely to work if the other player has a dominant strategy: Effectiveness of commitments Japan U.S.

21. Japan has a dominant strategy to close. • If US unconditionally closes, it won’t force Japan to open; J still prefers to close • So if US wants to force J open, has to use a conditional threat to close only if J does. • This has an implicit promise of opening if J does. • How to make this credible? • Legal change, delegation to agency or IO. Effectiveness of commitments

22. A threat is costless if it works. • So the size of the threat may be irrelevant; or it could matter for credibility. • One tactic is to create only the risk of a large punishment (brinksmanship). • Since promises are costly if successful, they have to be “just big enough.” Threats and promises compared

23. When is being able to make an unconditional commitment not to your advantage? • In a game with a second-mover advantage (military tactics, being able to respond to what opponent chooses). • But having the option of making a threat or promise is always to your advantage. • Never desirable to be threatened. • Often desirable to give others the option of making a promise to you. Effectiveness of unconditional commitments

24. How to acquire credibility in IR? • Automatic fulfillment (doomsday devices) • Delegation • Burning bridges • Reputation (linkage across issues or through time) • Divide interaction into small steps • Teamwork (ethnic conflict) • Irrationality (nuclear threats) • Brinksmanship Credibility in IR

25. We can apply this type of analysis to the study of institutions (BdM chapter, Shepsle). • Institution = the rules of a game. • Who can play • Order of moves • Options at each decision node III. Strategic moves as institutional choice

26. We know that rules can make a big difference to the outcome of a game, so institutions should matter. • This is what BdM labels the strategic approach to intl. institutions and regimes. • States build and choose institutions • This is a strategic move: choose institutions by anticipating their effects on outcomes. Institutional choice

27. BdM’s EU example: choosing the level at which to regulate radioactivity in food. • He provides ideal points and voting weights • The states had a choice between qualified-majority and unanimity voting. • They could calculate the results of each; appeared to choose QMV. Institutional choice

28. Strategic moves and institutional choice are also central to the concept of structure-induced equilibrium. • Remember the problem of social cycling: without agenda control, any outcome can be an equilibrium. • Institutions change this, induce an equilibrium by specifying the rules. • So actors behave strategically in the choice of institutions. • Institutions are endogenous and consequential. Structure-induced equilibrium