Schelling Conjecture Research Articles

International Negotiations in the Shadow of Elections

Within a formal model of international agreements in the shadow of renegotiations and domestic competition, we highlight three important ways elections shape international agreements. Elections determine who will be in control of policy in the future, which affects how leaders bargain today. Elections also determine the deals policymakers will agree to. Finally, proposers have the opportunity to shape the contours of domestic political competition with what is offered in pre-electoral bargaining. We identify that several canonical results in the literature – like the Schelling conjecture or the idea that hawkish leaders have an innate bargaining advantage over dovish leaders – only hold under certain restrictions on how voters evaluate their leaders. In contrast, we show paradoxically that when voters are prospective, electoral incentives shade the ability for domestic leaders to negotiate better deals for their publics. Counterintuitively, this leads to hawks agreeing to more conciliatory agreements than doves.

Temperature shocks, short-term growth and poverty thresholds: Evidence from rural Tanzania

Using the LSMS-ISA Tanzania National Panel Survey by the World Bank, we study the relationship between rural household consumption growth and temperature shocks over the period 2008–2013. Temperature shocks have a negative and significant impact on household growth if their initial consumption lies below a critical threshold. As such, temperature shocks slow income convergence among households, at least in the short run. Crop yields and total factor productivity in agriculture are the main transmission channels. Extrapolating from short-term elasticities to long-run phenomena, these findings support the Schelling Conjecture: economic development would help poor farming households to reduce the impacts of climate change. Hence, closing the yield gap, modernizing agriculture and favouring the structural transformation of the economy are all crucial issues for adaptation of farmers to the negative effects of global warming.

Does payoff equity facilitate coordination? A test of Schelling's conjecture

Starting from Schelling (1960), several game theorists have conjectured that payoff equity might facilitate coordination in normal-form games with multiple equilibria – the more equitable equilibrium might be selected either because fairness makes it focal or because many individuals dislike payoff inequities, as abundant experimental evidence suggests. In this line, we propose a selection principle called Equity (EQ), which selects the equilibrium in pure strategies minimizing the difference between the highest and smallest money payoff, if only one such equilibrium exists. Using a within-subjects experimental design, furthermore, we study the relative performance of EQ in twelve simple 2×2 coordination games. In many of these games, we find that EQ explains individual behavior better than a large range of alternative theories, including theories of bounded rationality and several other equilibrium selection principles. Yet we also observe that the frequency of EQ play depends on the payoff structure of the game. For instance, EQ play diminishes when the alternative equilibrium is socially efficient and not very unfair (compared with the EQ equilibrium). Our data suggests that equilibrium selection is affected by several factors and that subjects are heterogeneous in this respect, but also that equity is often a crucial factor to understand coordination.

Does Payoff Equity Facilitate Coordination? A Test of Schelling's Conjecture

Starting from Schelling (1960), several game theorists have conjectured that payoff equity might facilitate coordination in normal-form games with multiple equilibria ‒ the more equitable equilibrium might be selected either because fairness makes it focal or because many individuals dislike payoff inequities, as abundant experimental evidence suggests. In this line, we propose a selection principle called Equity (EQ), which selects the equilibrium in pure strategies minimizing the difference between the highest and smallest money payoff, if only one such equilibrium exists. Using a within-subjects experimental design, furthermore, we study the relative performance of EQ in twelve simple 2x2 coordination games. In many of these games, we find that EQ explains individual behavior better than a large range of alternative theories, including theories of bounded rationality and several other equilibrium selection principles. Yet we also observe that the frequency of EQ play depends on the payoff structure of the game. For instance, EQ play diminishes when the alternative equilibrium is socially efficient and not very unfair (compared with the EQ equilibrium). Our data suggests that equilibrium selection is affected by several factors and that subjects are heterogeneous in this respect, but also that equity is often a crucial factor to understand coordination.

Book Reviews

Maximilian Auffhammer of University of California, Berkeley reviews, “Climate Change and Common Sense: Essays in Honour of Tom Schelling” by Tom Schelling. The Econlit abstract of this book begins: “Thirteen papers, written in honor of Tom Schelling, analyze the fundamental political and economic processes driving climate change policy. Papers discuss norms, conventions, and institutions to cope with climate change; credible commitments, focal points, and tipping—the strategy of climate treaty design; tipping climate negotiations; bridging reality and the theory of international environmental agreements; the cost of ambiguity and robustness in international pollution control; time and the generations; discounting while treating generations equally; emerging markets and climate change—Mexican stand-off or low-carbon race?; moving U.S. climate policy forward—whether carbon taxes are the only good alternative; carbon taxes and the green paradox; derivative markets for pollution permits and incentives to innovate; development and climate adaptation; and Schelling's conjecture on climate and development—a test. Hahn is Professor of Economics in the Sustainable Consumption Institute at the University of Manchester and Director of Economics in the Smith School at the University of Oxford. Ulph is Director in the Sustainable Consumption Institute at the University of Manchester.”

Strategic ignorance in ultimatum bargaining

In his classic article “An Essay on Bargaining” Schelling (1956) argues that ignorance might actually be strength rather than weakness. We test and confirm Schelling's conjecture in a simple take-it-or-leave-it bargaining experiment where the proposer can choose between two possible offers. Option A always gives the proposer a higher payoff than option B. The payoff of the responder depends on the (randomly determined) state of nature. In one state payoffs of the two players are aligned whereas they are not aligned in the other state. The responder is always informed about the actual state. The proposer knows the actual state in our first treatment but not in the second. We find that proposers indeed benefit from ignorance because the responders accept almost all offers (even the unfavorable ones) if the payoffs are not transparent for the proposer. In additional treatments we investigate bargaining situations where the proposer can deliberately remain ignorant.

Domestic scrutiny ofEuropean Union politics: Between whistle blowing and opposition control

AbstractSomeEuropean law proposals are subject to scrutiny by national parliaments while others go unchecked. The analysis in this article indicates that the opposition scrutinisesEuropean Union law to gather information on the proceedings inside the Council of Ministers and theEuropean Parliament. Yet whereas strong opposition parties scrutinise highly politicised law proposals, weak opposition parties tend to scrutinise those proposals that are negotiated under the non‐transparent fast‐track procedure. In addition, there is ample evidence that the leading minister initiates scrutiny in order to strengthen his or her intergovernmental bargaining leverage. Yet, this Schelling Conjecture presumes that the party of the minister is located between the expected bargaining position in the Council and the coalition partner. Any other domestic interest constellation could lead to scrutiny motivated by whistle blowing. However, an issue's salience helps us to separate the whistle blowing from the Schelling Conjecture.

Strategic Ignorance in Bargaining

In his classic article An Essay on Bargaining Schelling (1956) argues that ignorance might actually be strength rather than weakness. We test and confirm Schelling's conjecture in a simple take-it-or-leave bargaining experiment where the proposer can choose between two possible offers. Option A always gives the proposer a higher payoff than option B. The payoff of the responder depends on the (randomly determined) state of nature, i.e., in state s2 payoffs of the two players are aligned while they are not in state s1. The responder is always informed about the actual state. The proposer knows the actual state in our first treatment but not in the second. We find that proposers indeed benefit from ignorance because the responders accept almost all offers (even the unfavorable ones) if the payoffs of the responder have not been transparent for the proposer. In additional treatments we investigate situations where the proposer can deliberately remain ignorant. One could assume that remaining ignorant on purpose would be punished by the responder at least if an unfavorable outcome results. Surprisingly, we find that strategically remaining ignorant tends to be beneficial for the proposer particularly if the responder does not know with certainty whether it was the proposer's intention to remain ignorant or whether it was not her intention.

Exploring the Schelling Conjecture in Reverse: ‘International Constraints’ and Cooperation with the International Criminal Tribunal for the Former Yugoslavia

Students of bargaining have long focused on the dual nature of international negotiations, which take place both internationally and domestically. The prevailing wisdom is that under certain conditions political leaders can use domestic constraints to get a better deal at the negotiating table. In this paper, I argue that under certain conditions leaders have an incentive to use ‘international constraints’ to pressure their domestic constituents into accepting a particular policy. I apply this argument to the Serbian and Croatian cases of western pressure for cooperation with the International Criminal Tribunal for the former Yugoslavia (Hague Tribunal).

Domestic politics and climate change: international public goods in two-level games

We use the theory of two-level games to explore how domestic constraints affect the outcome of bargaining games over national contributions to an international public good such as global climate change, and to discuss the implications for the Schelling conjecture. We model the international negotiations on two dimensions—domestic and foreign contributions to the international public good—and extend the basic two-level model by examining a nonzero sum, two-dimensional conflict model on level one that includes characteristics of both conflict and cooperation. Our main results suggest that if the domestic game is a ratification game (as in the presidential system of the US), then contributions do not exceed those in a benchmark game without domestic constraints. But if the domestic game is an election game (which is more important in the parliamentary system of most continental-European countries), contributions can actually be higher than the benchmark.

Segregation and the Provision of Spatially Defined Local Public Goods

Racial separation may be the result of many factors: variation in income, occupational differences, and individual preference come to mind immediately. Indeed, Thomas Schelling argued in 1969 that even mild individual preference for like neighbors could produce dramatic segregation in neighborhoods. This paper examines the robustness of his conclusion in two slightly more realistic environments. One adds the complication of vacant lots and more diverse utility-based agents. Each of the cases simulated here produced equilibria with some degree of racial segregation. The results therefore sustained Schelling's conjecture that individual intent is not necessarily related to the collective result of neighborhood segregation. In all of the simulations, each individual would have been content with a local neighborhood in which approximately half of the residents were of the same race; but all individuals acting together with this motive seemed to produce segregated neighborhoods. The Schelling conjecture was undermined to some degree by inclusion of local public goods, but only if they were highly valued. In those cases, proximity to the public goods worked against the disutility of mixed neighborhood so integrated neighborhoods became more likely. If the public goods were not highly valued, though, the segregation persisted or unstable and chaotic neighborhoods persisted.

International Bargaining with Two-Sided Domestic Constraints

Putnam revived interest in the “Schelling conjecture” that in international bargaining, a domestic ratification constraint provides a negotiator with a bargaining advantage. However, existing formal analyses of the Schelling conjecture generally allow only one side in the bargaining to be constrained. In this article, a model is analyzed in which both negotiators are constrained. A generalized version of the Schelling conjecture holds that if one negotiator's constraint is high and the other's is only low or medium, the former gets a better deal than if neither side were constrained, and the latter is worse off. With incomplete information, however, the complete opposite of what the Schelling conjecture predicts can occur, and there is an equilibrium in which delay in reaching an agreement results in both sides being worse off than if neither side were constrained. Incomplete information can but does not always completely eliminate the advantage of having a high constraint.

Domestic and International Asymmetries in United States–European Union Trade Negotiations

AbstractThis article studies the determinants of international bargaining power in instances of trade negotiations between the European Union and the United States. The authors' central hypothesis is that an appraisal of the US–EU trade relationship requires an understanding of the ways in which ``domestic'' political institutions shape the bargaining behavior of international actors. In particular, this article argues that the frequent EU ``successes'' in its negotiations with the US are the result of the bargaining power that its unique institutional arrangements grant its negotiators. In order to explain the distributional outcomes of international trade negotiations, the authors explore the ``Schelling conjecture'' and analyze why it is particularly relevant to the understanding of the unique bargaining power of EU negotiators when they are confronted with their American counterparts. To examine the explanatory power of domestic institutions in episodes of trade negotiations, the article analyzes the US-EC Uruguay Round agricultural negotiations (1986–1993).

Democratic Politics and International Trade Negotiations

Elections affect both the probability of successful ratification and the terms of international trade agreements; domestic politics in its simplest form shapes international negotiations. Without elections, the extent of protection in a trade agreement increases with the degree of divided government, and the Schelling conjecture—whereby an international negotiator can point to a hawkish legislature to extract greater concessions from the foreign country—holds only when the legislature is not too hawkish. An election (where the executive anticipates the preferences of the legislature imperfectly) implies that when divisions in government rise, the probability of ratification failure increases, the expected outcome becomes more protectionist, and the executive's influence vis-à-vis the foreign country declines, thus challenging the Schelling conjecture.