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1 International Trade Organization NAFTA Double-Edged Diplomacy R. D. Putnam Putnam Win-Set 3

2 Putnam Putnam-Iida-Tarar Putnam 4 1 Schelling (1980) 2 Schelling Conjecture 2 Milner and Rosendorff (1997), Mansfield, Milner and Rosendorff (2000) Putnam 3 Schelling 1

3 Putnam (1988) 2 Putnam 2 2 Putnam Win-Set 4 5 Putnam Putnam Putnam Larger win-set make Level 1 agreement more likely, ceteris paribus. (p.437) The smaller the win-sets, the greater the risk that the negotiations will break down.(p.438) 2 The relative size of the respective Level 2 win-sets will affect the distribution of the joint gains from the international bargain. (p.440)

4 Putnam Involuntary Defection Putnam Iida (1993) Iida (1993) 2 9 Rubinstein (1982) Baron and Ferojon (1989) Putnam Iida (1993) Putnam Iida Evans, Jacobson and Putnam (1993) Milner and Rosendorff (1997) Grossman and Helpman (2001) 9 Iida (1996), Mo (1994), (1995), Milner (1997), Milner and Rosendorff (1997), Tarar (2001), (2004), (2005), 10 Iida (1993, p.405) 11 Iida Outside Option

5 Putnam Iida Putnam Involuntary Defection Iida (1996) Tarar (2001) Iida (1996) Iida (1993) Tarar (2001)

6 Haller and Holden (1997), Humphreys (2007) Haller and Holden (1997) Super-Majority Rule Humphreys (2007) 2 Haller and Holden (1997) Putnam-Iida-Tarar

7 B B A A 0 1 B A E 0 1 2

8 Iida (1993) 1 Rubinstein (1982) A A x (x A, x B ) B B B 2 B B 2 1

9 I {1,..., N, N 1,..., N M } N M A I A {1,..., N } B I B {N 1,..., N M } 0 A i z A i I A z A 1 z A N Z A E A : Z A {a(1 : z),..., a(n : z)} a(1 : z) z i A A A (E A ) s A i s.t. a(s i : z) N 2 A s.t. a(s i : z)< N 2 i (E i ) Payoff Relevant s i (i 1,..., N : s i, s i s j j 1,..., N ) 12 B i 0 (s A, s B ) (I A { A }) (I B { B }) 1 0 (s A (z A, z B ), s B (z A, z B )) I A I 13 B 12 s i i (x A, x B ) s i s i z i 13 (s A, s B )

10 T 1, 2,... 0 (s A, s B ) X {(x A, x B ) 2 : x A x B 1 l A, B x l 0} x t t (x 0,..., x t 1 ) A A { A} t t 0 t A : X t X t A : X t 1 {Yes, No} B A 1 ( A, B ) (x A, x B : t) ( A, B ) P t 1 ( x A ( A, B ), x B ( A, B ): t ) {P} (s A, s B ) 1 ( A ( z A, z B ), B ( z A, z B )) r A i {Yes, No} r 1 r N R A A : R A {φ(yes :r), φ(no:r)} j(yes :r) r Yes φ(no:r) r No R A s.t. φ(yes :r) N 2 D A otherwise. 14 {P} 2 0

11 A B 4 R {(R A, R B ),(R A, D B ),(D A, R B ),(D A, D B )} D i S 0 Reduced Game P ( [0,1)) A,i B,j A u A i (x t ) t v(x t s i ) s.t. x t s i u A i (s i) s i s.t. x t < s i u A i ( ) s i u A i (D) s i u A i (P) 0 B u B j (x t ) t v(1 x t s j ) s.t. 1 x t s j u B j (s j) s j s.t. 1 x t < s j u B j ( ) s j u B j (D) s j u B j (P) 0

12 s A m x t B B s B m (1 x t ) 15 ([sm,1],[s A m,1]) B [sm,1 s A m] B Outside Option Rubinstein (1982) 2 [max{s m A, s A}, min{1 s m B,1 s B}] 15 Median-Voter theorem Black (1948),(1958), Downs (1957)

13 x (s m,j A,1 s m,j A ) if /(1 ) s m,j A x (x A, x B) (1 s m,j B, s m,j B ) if /(1 ) s m,j B (1/(1 ), /(1 )) otherwise s m,j A max{sa, j s m A }, s m,j max{sb, j s m B } B proof [max{s m A, s A}, min{1 s m B,1 s B}] ( A, B) 1 A x (x A, x B) B y ( y A, y B) x y y A x A x B y B 2 A B y ( y A, y B ) y A y A B A x (x A, x B ) x B x B One-stage deviation principle ( A, B) A A x A A x A B B B x x A x A y y A x A A x A B B

14 A x y y B y B x B y B B x B A x (x A, x B) (T 2, 4,...) B y ( y A, y B) A B y ( y A, y B ) t 1 y A t x A y A y A x A y y A < y A y A A B Q.E.D ( /(1 ) s m,j B ) (x A, x B) (1/(1 ), /(1 )) 0 Nash Bargaining Solution NBS Time-Preference arg max p A(x) p B (1 x) 0 x 1 pa, p B p'a (x)/p A (x) p' B (1 x)/(1 x) Binmore, Rubinstein and Wolinsky (1986) Time-Preference Fishburn and Rubinstein (1982)

15 [max{s m A, s A}, min{1 s m B,1 s B}] 1/2 NBS min{1 s m B,1 s B } 1/2 min{1 s m B,1 s B } NBS max{s m A, s A } 1/2 max{s m A, s A } NBS Plurality Voting 17 0 U A i z i z' i Z i U A i (z 1,..., z i 1, z i, z i 1,..., z N ; Z B ) U A i (z 1,..., z i 1, z' i, z i 1,..., z N ; Z B ) Z i (i A, B) i s i 17 1 Austen-Smith and Banks (2005)

16 sa 1 A s B E Nash Bargaining Solution NBS 1 B NBS 0 sa 1 A s B E Restricted Nash Bargaining Solution 1 B NBS (max{s m A, s A } 1/2)

17 proof A i U A i (z i, z i, Z B ) Z B B i i 2 i 18

18 [s i, s B j ] 2 [s i, s B j ] 1 [0, s i ] 3 [s i, s B j ] 1 [s B j, 1] i U A i (z i, z i, Z B ) U A i (s i ) [s i, s B j ] [s i, s B j ] 2 [0, s i ] 3 [s B j, 1] 1 [s i, s B j ] 2 [0, si] 3 [s B j, 1] 1 i U A i (z i, z i, Z B ) U A i (s i ) 2 3 [s i, s B j ] i [s i, s B j ]

19 (s1 s A B 1 >1) 1 (s A i s B j 1) 2 0 Q.E.D 1

20 B B B s m s B max s j A 0 s m sa A max s i 1 Nash Bargaining Solution A b NBS a b c a b E NBS NBS a

21 s A A 0 s s max s 1 m A i A B s m s B B E Restricted Nash Bargaining Solution 1 max j B b NBS b E NBS 3-2 E NBS c

22 R 1 A s m A R Nash Bargaining Solution E 1 B s m B C Putnam

23 A s m A s ' m max s i 1 A B s m max s j E Nash Bargaining Solution 1 B

24 A sm s A s ' A m s' 1 A s B E E 1 B Putnam 2 Putnam-Iida-Tarar 1 2

25 One-side (Iida) Two-side (Tarar) ( ) Baron, D. and J. Ferejohn (1989) Bargaining in Legislatures, The American Political Science Review, 83, pp Binmore, K. G. (1987) Perfect Equilibria in Bargaining Models, in Binmore K. G. and P. Dasgupta, (eds.), The Economics of Bargaining, Oxford: Basil Blackwell. Binmore, K. G., A. Rubinstein and A. Wolinsky (1985) The Nash Bargaining Solution in Economic Modeling, Rand Journal of Economics, 17, pp Black, D. (1948) On the Rationale of Group Decision-Making, Journal of Political Economy, 56, pp Black, D. (1958) The Theory of Committees and Elections, Cambridge: Cambridge University Press.

26 Downs, A. (1957) An Economic Theory of Democracy, New York: Harper Collins. Evans, P., H. Jacobson and R. Putnam (1993) Double-edged diplomacy: International Bargaining and Domestic Politics, Berkeley: University of California Press. Grossman, G. and E. Helpman (2001) Special interest politics The MIT Press. Haller, H. and S. Holden (1997) Ratification Requirement and Bargaining Power, International Economic Review, 38, pp Humphreys, M. (2007) Strategic ratification, Public Choice, 132, pp Iida, K. (1993) When and How Do Domestic Constraints Matter? Two-Level Games with Uncertainty, Journal of Conflict Resolution, 37, pp Iida, K. (1996) Involuntary defection in two-level games, Public choice, 89, pp Milner, H.V. (1997) Interests, institutions, and information: Domestic politics and international relations, Princeton: Princeton University Press. Milner, H.V. and B.P. Rosendorff (1997) Democratic Politics and International Trade Negotiations: Elections and Divided Government as Constraints on Trade Liberalization, Journal of Conflict Resolution, 41, pp Mo, J. (1994) The Logic of Two Level Games with Endogenous Domestic Coalitions, Journal of Conflict Resolution, 38, pp Mo, J. (1995) Domestic Institutions and International Bargaining: The Role of Agent Veto in Two-level Games, American Political Science Review, 89, pp Osborne, M. and A. Rubinstein (1990) Bargaining and Markets, Academic Press, San Diego. Osborne, M. and A. Rubinstein (1994) A Course in Game Theory, The MIT Press. Putnam, R.D. (1988) Diplomacy and Domestic Politics: The Logic of Two-level Games, International organization, 42, pp Rubinstein, A. (1982) Perfect Equilibrium in Bargaining Model, Econometrica, 50, pp Shelling, T. (1980) The Strategy of Conflict, Harvard Univ. Press. Tarar, A. (2001) International Bargaining with Two-sided Domestic Constraints, Journal of Conflict Resolution, 45, pp Tarar, A. (2004) Bargaining Power, the Schelling Conjecture, Fast-track Trade Negotiating

27 Authority, Mimeo. Department of Political Science, Texas A&M University. Tarar, A. (2005) Constituencies and Preferences in International Bargaining, Journal of Conflict Resolution, 49, pp

28 The Doshisha University Economic Review Vol.63 No.3 Abstract Katsuhiko YONEZAKI, The Two-Level Game: The Interrelationship of International Bargaining and Domestic Decision Processes I examine the two-level games model with a negotiation process for the selection of representatives. Putnam (1988) has proposed two-level games and has advanced hypotheses on international bargaining with domestic constrains. Iida (1993/1996) and Tarar (2001) have examined the hypotheses using a gametheoretic model. They stressed that asymmetric information plays an important role in the hypotheses. Even if complete information is available, our model leads the conditions of the hypotheses.

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