DP5401 Re-election Incentives and the Sustainability of International Cooperation

Author(s): Paola Conconi , Nicolas Sahuguet

Publication Date: December 2005

Keyword(s): self-enforcing cooperation , re-election incentives , overlapping generations

JEL(s): C72 , D72 , F0

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP5401.asp

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.