The Customary International Law Supergame February 23, 2004 Having selected the n-person iterated prisoners dilemma game, and the penance or grim trigger strategy, in this section, we develop the more specific parameters and assumptions of our model a. Efficiency and symme We assume that failure to reach a cooperative equilibrium--failure to reach an implicit agreement--is inefficient. Of course, there are many circumstances in which n implicit agreement is needed, and reaching one would be inefficient. However, our goal is to examine strategic barriers to implicit agreement; reducing these barriers would always increase efficiency, just as reducing the general barriers to contract between private parties would always increase efficiency without requiring that parties contract in every circumstance. This perspective is consistent with the first theorem of welfare economics, the Coase Theorem, and the"efficiency principle: If people are able to bargain together effectively, and can effectively implement and enforce their decisions then the outcomes of economic activity will tend to be efficient (at least for the parties to the bargain). If the barriers to bargaining are eliminated, and parties reach no bargain, we may assume that there was no Pareto improving bargain available So, we assume payoffs along the lines of the classic prisoners dilemma. Even within this category, there is variation. Some circumstances will be more like a commons problem, or a cartel, in which the greater the number of players that comply, the greater the incentives to defect. Others will be the opposite, based on network effects, public goods or economies of scale: the more players that comply, the greater the incentives to comply. In other cases, the payoffs from defection may not be substantially greater than the payoffs to compliance Different players may be affected differently by defection or compliance Certainly in the Cil field there are notable cases of asymmetry. For example, a state with an extensive diplomatic service will have more at stake in connection with a rule of diplomatic immunity. A land-locked state may have a different perspective on the territorial sea than a state with extensive coastlines. Asymmetry affects each states incentives to comply. Linkage among varying issues may either increase or decrease asymmetry. b. Identity and Number of Players 55 PAUL MILGROM JOHN ROBERTS. ECONOMICS ORGANIZATION AND MANAGEMENT While our model deals with games in which information is common knowledge Parisi develops the Harsanyian concept of stochastic symmetry and role reversibility: the longer the shadow of the future, the less any one state can be certain of the way in which it will be affected by a particular rule see Parisi, supra note 2. See also, robert o Keohane, The Demand for International Regimes, 36: 2 INT'L ORG. 325(1982)The Customary International Law Supergame February 23, 2004 18 Having selected the n-person iterated prisoner’s dilemma game, and the penance or grim trigger strategy, in this section, we develop the more specific parameters and assumptions of our model. a. Efficiency and Symmetry We assume that failure to reach a cooperative equilibrium—failure to reach an implicit agreement—is inefficient. Of course, there are many circumstances in which no implicit agreement is needed, and reaching one would be inefficient. However, our goal is to examine strategic barriers to implicit agreement; reducing these barriers would always increase efficiency, just as reducing the general barriers to contract between private parties would always increase efficiency without requiring that parties contract in every circumstance. This perspective is consistent with the first theorem of welfare economics, the Coase Theorem, and the “efficiency principle”: “If people are able to bargain together effectively, and can effectively implement and enforce their decisions, then the outcomes of economic activity will tend to be efficient (at least for the parties to the bargain).” 55 If the barriers to bargaining are eliminated, and parties reach no bargain, we may assume that there was no Pareto improving bargain available. So, we assume payoffs along the lines of the classic prisoner’s dilemma. Even within this category, there is variation. Some circumstances will be more like a commons problem, or a cartel, in which the greater the number of players that comply, the greater the incentives to defect. Others will be the opposite, based on network effects, public goods or economies of scale: the more players that comply, the greater the incentives to comply. In other cases, the payoffs from defection may not be substantially greater than the payoffs to compliance. Different players may be affected differently by defection or compliance. Certainly in the CIL field there are notable cases of asymmetry. For example, a state with an extensive diplomatic service will have more at stake in connection with a rule of diplomatic immunity. A land-locked state may have a different perspective on the territorial sea than a state with extensive coastlines. Asymmetry affects each state’s incentives to comply. Linkage among varying issues may either increase or decrease asymmetry. 56 b. Identity and Number of Players 55 PAUL MILGROM & JOHN ROBERTS, ECONOMICS, ORGANIZATION AND MANAGEMENT 24 (1992). 56 While our model deals with games in which information is common knowledge, Parisi develops the Harsanyian concept of stochastic symmetry and role reversibility: the longer the shadow of the future, the less any one state can be certain of the way in which it will be affected by a particular rule See Parisi, supra note 2. See also, Robert O. Keohane, The Demand for International Regimes, 36:2 INT’L ORG. 325 (1982)