Working Paper: CEPR ID: DP5401
Authors: Paola Conconi; Nicolas Sahuguet
Abstract: 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.
Keywords: Overlapping Generations; Reelection Incentives; Self-Enforcing Cooperation
JEL Codes: C72; D72; F0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reelection incentives (D72) | cooperation (P13) |
| renewable mandates (Q27) | cooperation (P13) |
| reelection incentives (D72) | renewable mandates (Q27) |
| recent performance (D29) | reelection (D72) |
| term limits (K16) | international cooperation (F53) |
| reelection (D72) | policymakers' behavior (D72) |
| policymakers' behavior (D72) | cooperation (P13) |