DP5401 Re-election Incentives and the Sustainability of International Cooperation

Author(s): Paola Conconi, Nicolas Sahuguet
Publication Date: December 2005
Keyword(s): overlapping generations, re-election incentives, self-enforcing cooperation
JEL(s): C72, D72, F0
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5401

This paper examines the impact of policy-makers' horizons on the sustainability of international cooperation. We describe a prisoners' dilemma game between two infinitely-lived organizations (countries) run by agents (policy-makers) with a shorter tenure. The agents' mandates are finite but potentially renewable and staggered across different organizations. We show that the efficient cooperative equilibrium is only sustainable when policy-makers are re-electable. Moreover, re-election incentives can act as a discipline device, making it easier to sustain cooperation between policy-makers with renewable mandates than between policy-makers who are automatically re-elected. However, if the chances of re-election depend significantly on recent performance, policy-makers will collude to get re-elected. In this case, term limits may help to sustain international cooperation.