chad rector george washington university federations and international organizations 1.puzzle...
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![Page 1: Chad Rector George Washington University Federations and International Organizations 1.Puzzle 2.Cooperation and Commitment 3.Contrived Symmetry 4.Case](https://reader030.vdocument.in/reader030/viewer/2022013011/56649d6c5503460f94a4c3e7/html5/thumbnails/1.jpg)
Chad Rector
George Washington University
Federations and International Organizations
1.Puzzle
2.Cooperation and Commitment
3.Contrived Symmetry
4.Case study: Australia
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1.Puzzle
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1.Puzzle
• 1850s – independence
• 1860s – tacit cooperation
• 1880s – failed international organization
• 1890s – federal constitution (1901)
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2. Cooperation and Commitment
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2. Cooperation and Commitment
Payoff to A
Payoff to B
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Payoff to A
Payoff to B
No cooperation
Cooperation
2. Cooperation and Commitment
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Payoff to A
Payoff to B
No cooperation
Cooperation
2. Cooperation and Commitment
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Payoff to A
Payoff to B
No cooperation
Bargaining space
2. Cooperation and Commitment
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Payoff to A
Payoff to B
No cooperation
Negotiated outcome
2. Cooperation and Commitment
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Payoff to A
Payoff to B
No cooperation
Limits of bargaining
2. Cooperation and Commitment
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Payoff to A
Payoff to B
No cooperation
Negotiated outcome
2. Cooperation and Commitment
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Relationship-specific asset: Investment whose return depends on the nature of a relationship
• Wal-Mart and contractors
• Taiwan and U.S. defense suppliers
• Adaptation to ally or market niche
2. Cooperation and Commitment
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Payoff to A
Payoff to B
No cooperation
Negotiated outcome (Nash Bargaining Solution)
2. Cooperation and Commitment
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Payoff to A
Payoff to B
Never start cooperation in the first place
Negotiated outcome
2. Cooperation and Commitment
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Payoff to A
Payoff to B
Never start cooperation in the first place
Negotiated outcome
Cooperation starts, then ends
2. Cooperation and Commitment
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Payoff to A
Payoff to B
Never start cooperation in the first place
Negotiated outcome
Cooperation starts, then ends
2. Cooperation and Commitment
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Payoff to A
Payoff to B
Never start cooperation in the first place
Negotiated outcome
Cooperation starts, then ends
2. Cooperation and Commitment
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3. Contrived Symmetry
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Create exit costs
Payoff to A
Payoff to B
Never start cooperation in the first place
Negotiated outcome
Cooperation starts, then ends
3. Contrived Symmetry
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Payoff to A
Payoff to B
Never start cooperation in the first place
Negotiated outcome
Cooperation starts, then ends
Cooperation starts, then ends, and institution costly to leave
3. Contrived Symmetry
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Institutions that create exit costs
• Federal party systems
• Military / bureaucracy
• Identity
3. Contrived Symmetry
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4. Australia
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4. Australia
• 1850s – independence
• 1860s – tacit cooperation
• 1880s – failed international organization
• 1890s – federal constitution (1901)
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4. Australia
New South Wales:
• Global trade, agriculture
• Free-trade coalition
Victoria:
• Regional trade, manufactures
• Protectionist coalition
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4. Australia
New South Wales: Prefers IO
• Global trade, agriculture
• Free-trade coalition
Victoria: Prefers Federation
• Regional trade, manufactures
• Protectionist coalition
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4. Australia
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
1867 1871 1875 1879 1883 1887 1891 1895 1899
Victoria
New South Wales
Average tariffs
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4. Australia
Victoria
New South Wales
Regional trade / total trade
10%
15%
20%
25%
30%
35%
40%
45%
50%
1871 1875 1879 1883 1887 1891 1895 1899
New Zealand
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Conclusion
States choose federation instead of IO when:
• Large gains from cooperation
• Large, and unequal, relationship-specific assets