University of California Press
Chapter Title: Nested Games and Rationality
Book Title: Nested Games
Book Subtitle: Rational Choice in Comparative Politics
Book Author(s): GEORGE TSEBELIS
Published by: University of California Press. (1990)
Stable URL: https://www.jstor.org/stable/10.1525/j.ctt1pnk3s.6
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Chapter One
Nested Games and Rationality
This book analyzes cases in which an actor confronted with a
series of choices does not pick the alternative that appears to be
the best. In the course of the book, the reader will see that British
Labour party activists who consider their standing MP too moderate
may vote to replace her, although that choice may lead to the
loss of a seat for the Labour party; that Belgian elites who are
considered in the consociational literature to be accommodating
and compromising in character sometimes initiate political conflict;
and that French political parties in certain constituencies do
not support their coalition partner, leading their own coalition to
defeat.
Why are situations in which an actor chooses an alternative that
appears to be against her own interests, or not the best she can do
under the existing circumstances, intriguing?Why do they demand
explanation? Choices that do not appear to be the best an actor
can do are puzzling because most observers assume (at least implicitly)
that people try to behave in ways that maximize the achievement
of their presumed goals, that is, they make optimal choices.
The goal of this book is to provide a systematic, empirically accurate,
and theoretically coherent account of apparently suboptimal
choices. The following examples illustrate the importance and
frequence of apparently suboptimal choices in politics.
I. Some Apparently Suboptimal Choices
Urho Kekkonen was first elected president of Finland in 1956. His
presidency was so successful that he occupied the office for twenty-
I
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2. Nested Games
five years. It was, according to Duverger (1978, 63), "the longest
and most powerful presidency in Finnish history." What is interesting
for our purposes is how this presidency became possible.
Therefore, I examine the preferences and behavior of the actors
involved in the 1956 Finnish presidential election.
According to Finnish law, presidential elections are conducted
by a special three hundred-member electoral college. An election
may require two rounds if no candidate gains a majority of the
votes. The first two ranking candidates then compete in a second
round, assuring a majority vote for the winner.
In 1956, three candidates participated in the first round: the
agrarian Urho Kekkonen, the Socialist Karl-August Fagerholm,
and the incumbent conservative Juo Kusti Paasikivi. The most
challenging opponent for Kekkonen, who had the support of the
Communist party, was the conservative Paasikivi. One would expect
the Communists to support Kekkonen in the first round with
all their fifty-six votes. Instead, only fourteen Communists cast
their votes for Kekkonen; the majority (forty-two out offifty-six)
voted for the Socialist candidate. Was this a split inside the Communist
party? It was not; the Communists disliked Fagerholm
intensely.
Why did most of the Communists choose not to support their
preferred candidate, Kekkonen, that is, why did they choose suboptimal
behavior? In order to understand the logic of the Communist
vote, one must consider the full story of the 1956 election.
Paasikivi was eliminated in the first round with 84 votes, against
114 for Fagerholm and 102. for Kekkonen. In the second round,
when Kekkonen faced Fagerholm, the Communists voted exclusively
for the former. Kekkonen was elected with 151 votes;
Fagerholm was defeated with 149.
Although the Communists preferred Kekkonen, they voted for
Fagerholm in the first round in order to eliminate the more
threatening Paasikivi from the race. The Communists misrepresented
their preferences in the first round to promote their most
preferred outcome in the second round. The Communists understood
that the supposed question of the first round—"which one
of the three candidates do you prefer?"—was immaterial. First
round voting was a path leading to the second round and to a
competition between either Kekkonen and Paasikivi or Kekkonen
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Nested Games and Rationality 3
and Fagerholm. Given that Kekkonen could defeat Fagerholm but
not Paasikivi in the last round, his supporters took the necessary
steps to assure the final victory of Kekkonen: they eliminated from
the last round Kekkonen's most dangerous opponent, Paasikivi.
An actor votes strategically or sophisticatedly (as opposed to
sincerely) if in one or more rounds of a series of votes, she votes
against her preferences in order to assure a more preferred final
outcome. According to this definition, the Communists voted
strategically in 1956. Had the Communists voted sincerely, Kekkonen
would have received 144 votes in the first round, Paasikivi,
84, and Fagerholm, 72. However, in the succeeding round, in
which Kekkonen would have faced Paasikivi, Paasikivi would
have won the election. Thus, the Communists' behavior, which
was surprising at first glance, turns out to be optimal upon closer
consideration. It was, in fact, a manifestation of strategic voting.
This is the end of the factual story; however, this is not the end
of the conceptual investigation. Farquharson (1969) traced sophisticated
voting back to Pliny the Younger, and Gibbard (1973)
found that strategic voting is possible in all resolute electoral
systems.1
The possibility of altering outcomes through sophisticated
voting leads to a new series of questions. Was strategic voting
possible for the Socialists as well as the Communists? If
so, could the Socialists have voted in such a way as to prevent
Kekkonen from getting elected?
The answer to both questions is affirmative. The Socialists also
could have voted strategically and prevented the election of Kekkonen.
In fact, if they had withdrawn their candidate in the first or
second round, the duel between Kekkonen and Paasikivi would
have ended in Kekkonen's defeat, as the Socialists would have
wished in such a case. Why didn't they follow such a strategy? If
strategic voting for the Communists was not the mistake it
appeared at first glance, but rational (that is, optimizing) behavior,
and if strategic voting was available to the Socialists, then the
Socialists chose a suboptimal option: to vote sincerely. Why?
To vote strategically, Socialist leaders would have had to explain
to their own party activists and voters why they were withi.
Resolute electoral systems are those that exclude ties. For a similar proof
that does not require resoluteness, see Schwartz (igSz).
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4 Nested Games
drawing their quite successful candidate—a difficult task. This
constraint meant the Socialist leadership was involved in two different
games simultaneously. In the parliamentary arena, where
the president of Finland was to be decided, strategic voting was the
optimal choice. In the internal (party) arena, however, where
maintaining the allegiance of activists and voters was at stake,
sophisticated voting was not possible. When the consequences of
strategic voting in both arenas were considered together, strategic
voting ceased to be optimal.
The situation was different for the Communists for two reasons.
First, Kekkonen was not the Communist candidate, but an agrarian
one, so the Communists did not have to explain why they did
not vote for their own candidate. Second, Communist parties all
over the world (at least in 1956) were known for their observance
of the principle of "democratic centralism," which prescribes
obedience once a decision is made. Democratic centralism minimizes
internal discord and provides the leadership with necessary
freedom of movement. So, although the Communists also were
involved in games in multiple arenas, the constraints in the internal
arena were not important, and the optimizing choice in the
parliamentary arena was the optimal strategy overall.2
This story presents a series of puzzles. In the beginning, the
Communists appeared to behave in a suboptimal way. Once their
behavior was explained as strategic voting, the question changed
to why the Socialists voted sincerely and thus behaved suboptimally.
Once the Socialist behavior became intelligible, that is,
when it was explained as optimal behavior, then the question
shifted to why the two parties behaved differently, why optimal
behavior for one party was suboptimal for the other.
The puzzles presented in the Finnish situation are not isolated.
Generally, situations of political representation generate simultaneous
involvement in several games: in the parliamentary game
and in the electoral game for MPs, in a bargaining game and in a
leader-follower game for trade union representatives, in an international
game and in a domestic politics game for national leaders.
z. At this point, one could ask why the two parties are organized differently
and try to explain their organization as an optimal response to different goals or
an optimal adaptation to different conditions.But doingso is beyond the scope of
this book.
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Nested Games and Rationality 5
The interaction between economics and politics can also be conceptualized
as several different games played by the same actors.
The study of any one of these games in isolation may lead to
puzzles similar to the Finnish case. Only the study of the whole
network of games in which an actor is involved will reveal the
actor's motivations and explain his behavior.
Sometimes an actor's involvement in several games is accidental.
Two usually independent games get connected: imagine wage
negotiations in some Western country in the 19608 and then in the
19705. In the first case, the game can be studied in isolation. In the
second, the consequences of the 1973 oil shock have to be introduced.
At other times, institutions are explicitly designed to alter
the results of isolated games. Compare the deliberations of a parliament
with the deliberations of a jury or the Supreme Court. In
the first case, debates are public, and elections follow at regular
intervals. In the second, every measure is taken to isolate the game.
In the first case, the input of the public and different pressure
groups is structurally assured. In the second, every measure is
taken to assure the independence of the players from any consideration
outside the game itself. Finally, sometimes the connection
between different arenas may itself be part of a political struggle:
conservative economists argue for the separation of economic
from political games because they believe that free markets produce
efficient economic outcomes and government intervention is
an impediment to efficiency. Others believe that government action
(which may be suboptimal from the purely economic point of
view) corrects politically unacceptable outcomes generated by the
market. In a general way, one can argue that democracies have
built-in situations where games are not played in isolation and,
therefore, where choices may appear to be suboptimal.
II. Nested Games: The Logic of
Apparently Suboptimal Choice
The assumption that people maximize their goal achievement is
not the only possible starting point for an explanation of suboptimal
choice. One could argue that Finnish parties make mistakes;
that the English activists, the Belgian elites, and the French
parties considered in later chapters make mistakes; or that all
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6 Nested Games
these political actors were motivated by other forces, such as habit
or jealousy; or that Communists or labor activists belong to a
different culture. One could also disregard individual actions and
argue that such issues are not important, that what matters in political
science are general, "systemic" characteristics and not the
properties of individuals.
This book does not follow any of these directions. Along with
the mainstream of contemporary political science, I assume that
human activity is goal oriented and instrumental and that individual
and institutional actors try to maximize their goal achievement.
I call this fundamental assumption the rationality assump-
tion.
Unlike others in the mainstream, however, I make the rationality
assumption explicit, derive its consequences, and draw upon it
when formulating explanations. Moreover, I assume that at every
step of the way, political actors respect the requirements of rational
behavior. In this sense, rational action is one of the explicit
major themes of this book; in other words, this book is a rationalchoice
approach to comparative politics.
Chapter 2. enumerates the requirements of rationality. I show
that one of these requirements is conformity to the prescriptions of
game theory whenever individuals interact with one another.
Therefore, I use game theory to study the interactions among different
political actors.
Chapter 3 explains the fundamental game theoretic material
used in the book. In game theory, the players face a series of options
(strategies); when each selects one strategy, the playersjointly
determine the outcome of the game, receiving the payoffs associated
with that outcome. In order to find the solution to a problem,
game theory assumes that the rules of the game (which determine
the available strategies) and the payoffs of the players are fixed.
Once the rules and payoffs are fixed, the actors choose mutually
optimal strategies; each player selects a strategy that maximizes
his payoff, given what the other players do. This account specifies
that game theory does not leave room for suboptimal action.
How can suboptimal action exist? How can an actor with a
series of options Aj, . . . ,An, out of which A; appears to be optimal,
choose something different from A;?
Cases of apparently suboptimal choice are in fact cases of disThis
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Nested Games and Rationality 7
agreement between the actor and the observer. Why would the
actor and the observer disagree as to what the optimal course of
action is? There are two possibilities: either the actor actually does
choose a nonoptimal strategy, or the observer is mistaken.
There are two cases in which the actor does choose suboptimally:
if he cannot choose rationally,3
or if he makes a mistake.
For reasons I explain in Chapter z, I do not think the first case is
important in the study of political phenomena. The second case
cannot occur often because if the actor recognizes that he was
mistaken, he will presumably correct his behavior.
There are also two cases in which the observer may not recognize
the optimal course of action. First, the observer makes a mistake,
thinking that the optimal action is A; when it is not. Second,
the observer thinks the available set of actions is limited to
A!, ... ,An when it is not—some additional options may be available,
includingone that is better than A,.
This book studies apparently suboptimal actions because they
are frequently cases of disagreement between actor and observer.
Therefore, I focus on the reasons the observer failed to recognize
the optimal action. To summarize, the argument of this book is
that if, with adequate information, an actor's choices appear to be
suboptimal, it is because the observer's perspective is incomplete.
The observer focuses attention on only one game, but the actor is
involved in a whole network of games—what I call nested games.
What appears suboptimal from the perspectiveof only one gameis
in fact optimal when the whole network of games is considered.
There are two major reasons for disagreement between actor
and observer. First, option A; is not optimal because the actor is
involved in games in several different arenas, but the observer
focuses on only one arena. Let us call the arena that attracts the
observer's attention the principal arena. The observer disagrees
with the actor's choices because the former sees the implicationsof
the latter's choices only for the principal arena. However, when
the implications in other arenas are considered, the actor's choice
is optimal. I refer to this case of nested games as games in multiple
arenas.
In the second case, option A; is not optimal because the actor
3. I explain the requirements of rational choice in Chapter z.
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8 Nested Games
"innovates," that is, takes steps to increase the number of available
options so that some new option is now better than A;. Increasing
the available options means actually changing the rules of
the game that define the options available to each player. In this
case, the observer does not see that the actor is involved not only
in a game in the principal arena, but also in a game about the rules
of the game. I call this case of nested games institutional design.4
Both kinds of nested games (games in multiple arenas and institutional
design) may lead to apparently suboptimal choices. In the
case of games in multiple arenas, the observer considers the game
in the principal arena without taking contextual factors into
account, whereas the actor perceives that the game is nested inside
a bigger game that defines how contextual factors (the other arenas)
influence his payoffs and those of the other players. In the case
of institutional design, the game in the principal arena is nested
inside a bigger game where the rules of the game themselves are
variable; in this game, the set of available options is considerably
larger than in the original one. The actor is now able to choose
from the new set one strategy that is even better than his best
option in the initial set.
An element of surprise is present in all cases of disagreement
between actor and observer. The factor that may vary is the intensity
or magnitude of the surprise. Sometimes the actor and the
observer disagree on details, so the actor appears to make a very
small mistake; sometimes the observer thinks a priori that exactly
the opposite course of action was appropriate, so the actor
appears to make a choice totally against his own interests. From a
theoretical point of view, all cases of suboptimal choice are puzzling;
from an empirical point of view, only serious disagreements
between observer and actor indicate some fundamental misperception
by the observer or some important inadequacy of existing
theories.
For each of the two kinds of nested games (games in multiple
arenas and institutional design), the book makes two essential
contributions: one substantive, and one methodological. In the
case of games in multiple arenas, any of the actor's moves has
4. The reason I use the term institutional design instead of institutional game
will become clear in Chapter 4.
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Nested Games and Rationality 9
consequences in all arenas; an optimal alternative in one arena (or
game) will not necessarily be optimal with respect to the entire
network of arenas in which the actor is involved. Although the
observer of only one game considers some behavior irrational or
mistaken, the behavior is in fact optimizing inside a more complicated
situation. The actor may choose a suboptimal strategy in one
game if this strategy happens to maximize his payoffs when all
arenas are taken into account. The substantive contribution of
this examination of games in multiple arenas is that it presents a
systematic way to take into account contextual factors (the situation
in other arenas). Such contextual factors influence the payoffs
of the actors in one arena, leading to the choice of different
strategies; therefore, the outcomes of the game are different when
contextual factors are taken into account.
In the case of institutional design, a rational actor seeks to increase
the number of alternatives, thereby enlarging his strategy
space. Instead of confining himself to a choice among available
strategies, he redefines the rules of the entire game, choosing
among a wider set of options. Therefore, institutionalchanges can
be explained as conscious planning by the actors involved. In the
case of institutional design, disagreement between the actor and
the observer stemmed from the fact that the observer did not anticipate
the actor's political innovation. Had the observer known
that additional options existed, he would have agreed that one of
the new options was optimal. So institutional design provides a
systematic way to think about political institutions. Institutions
are not considered simply inherited constraints, but possible
objects of human activity.
The conventional game theoretic way to deal with problems of
games in multiple arenas or institutional design is to consider all
the actors involved in all existing arenas, write down all their
available strategies, add all the possible innovating strategies, and
solve this giant game. In this giant game, all contextual (other
relevant actors and arenas) and institutional (rules of possible
games) factors are taken into account. If such an enterprise were
possible, and if both the actor and the observer were solving this
giant game, there would be no possible disagreement about what
constitutes optimal action. However, such a heroic enterprise is
impossible—at least for practicalpurposes.
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io Nested Games
In order to reduce this problem to manageable dimensions and
show the reasons for disagreement between actors and observers,
I deal with each case of apparently nonoptimal choice (games
in multiple arenas and institutional design) separately. I utilize a
technically simple model to represent games in multiple arenas.
In Chapter 3, I explain the relation between my model and traditional
game theoretic approaches. This representation leads to
empirically interesting results while keeping the level of mathematical
expertise demanded of the reader to high school algebra.
Technically, games in multiple arenas are games with variable
payoffs; the game is played in the principal arena, and the variations
of the payoffs in this arena are determined by events in one or
more other arenas. The nature of the final game changes, depending
on the order of magnitude of these payoffs, whether or not the
actors can communicate with one another, and whether or not the
game is repeated over time.
Technically, institutional change is presented as a problem of
intertemporal maximization, where complications arise because
future events cannot be clearly anticipated. The available information
about future events is of crucial importance for the choice of
different types of institutions.
To recapitulate, in the presence of adequate information, if
actors do not choose what appears to be the optimizing strategy, it
is because they are involved in nested games: games in multiple
arenas or institutional design. Games in multiple arenas are technically
represented by games with variable payoffs. Payoff variations
are determined by and reflect contextual factors. The payoffs
of the game in the principal arena vary according to the situation
prevailing in other arenas, and the actors maximize by taking into
account these variable payoffs. The term institutional design refers
to political innovation concerning the rules of the game. The
actors choose among the different possible games, that is, among
the possible sets of rules. In this case, they enlarge their strategy
space and choose a previously unavailable option.
I indicated that disagreement between actor and observer stems
from either a wrong choice by the actor or the incomplete perspective
of the observer. If we assume actor rationality, the first case
(the less important) is eliminated. The remaining case can be explained
by the nested games framework in which choices appear to
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Nested Games and Rationality 11
be suboptimal in one game because the observer does not take into
account that the game in the principal arena is nested inside either
a network of other arenas or a higher order game where the rules
themselves are variable. Within this rational-choice approach, and
assuming adequate information, the concept of nested games is
the only explanation for the choice of apparently suboptimal
strategies.
III. Outline of the Book
The book describes situations in which actors do not choose the
apparently optimal alternative because they are involved in nested
games, that is, contextual or institutional factors have an overriding
importance.
The two kinds of nested games (games in multiple arenas and
institutional design) in principle require equivalent treatment. In
practice, however, there is an asymmetry. I provide a complete
theoretical treatment of games in multiple arenas, draw implications
from this treatment, and test these implications in different
empirical situations. I treat institutional design in a less rigorous
way—I draw up a typology of institutions and observe different
kinds of institutions in the empirical chapters that fit this typology.
I treat institutional design less exhaustively than games in multiple
arenas because institutional change by definition involves political
innovation, and it is difficult (if not impossible) to know its rules,
much less to have a complete theory about them. Riker (1986)
considers the development of political innovation an art as opposed
to a science, gives it the name heresthetics, and argues
that its laws are unknowable. Whether the laws of institutional
design are unknowable or simply unknown, the issue of institutional
design is too important to be left out of a book adopting
a rational-choice methodology. However, the current state of
knowledge on institutions justifies the absence of theoretic rigor.
This asymmetry of treatment is clear in the difference in theoretical
precision between Chapters 3 and 4. Also, for each of the
empirical chapters (5, 6, and 7), the effects of context occupy the
major part of the exposition, and only the final section discusses
the politics of institutional change. Although theoretically each
reason for nonoptimal choice deserves equal treatment, in pracThis
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11 Nested Games
tice, there are a major and a minor theme to the book: in the major
theme, institutions are assumed constant, and I focus on the effects
of political context (games in multiple arenas). In the minor theme,
I study the change of rules (institutional design).
The presentation is organized in the following way: Chapter i
examines the implications of the rational-choice approach in
detail. I show why and how this approach differs from other research
programs in the social sciences. The approach entails a
series of requirements for political actors: the absence of contradictory
beliefs, the absence of intransitive preferences, and conformity
to the axioms of probability calculus and the rules of game
theory (to name but a few). How realistic is such an approach?
Once the range of applicability of the theory is defined, the
rational-choice approach is a legitimate and fruitful approximation
of reality.
In Chapter 3, I lay out the theoretical foundation of games in
multiple arenas: they are games with variable payoffs, where the
payoffs of the game in the principal arena are influenced by the
situation prevailing in another arena. The chapter examines simple
two-by-two games with variable payoffs, providing the basis for
subsequent applications. The relationship among familiar games
(prisoners' dilemma, chicken, assurance game, and deadlock) is
examined and their equilibria identified, familiarizing the reader
with their game theoretic properties. The distinction between oneshot
and iterated games is introduced, and the differences in outcomes
are derived theoretically. Finally, I examine comparative
statics results (for example, what happens to the frequency of
choice of different strategies when these games are iterated and
the payoffs of the players vary). Each empirical chapter presents a
different substantive application of the concept of games in multiple
arenas in different Western European countries.
Chapter 3 provides the direct theoretical foundation for the subsequent
empirical chapters, and I refer frequently to its results.
Nontechnical readers could take the references to Chapter 3 on
faith. In this case, they may see in this book little more than three
empirical chapters with loose connections to one another. It would
be much more profitable if they tried to work their way through
the elementary mathematics of Chapter 3 to understand the logic
of the subsequentarguments. In this case, the unity of the empiriThis
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Nested Games and Rationality 13
cal chapters as demonstrations of the logic of nested games will
become apparent, and other cases amenable to similar theoretical
treatment will become clearer. What is required for complete
understanding of the book is not prior knowledge of mathematics,
but the will to study Chapter 3 so that its arguments are familiar
each time they are used.
Chapter 4 deals with institutional design. It is a study of the
necessary conditions for institutional design, a classification of
different kinds of institutional design, and a discussion of the
conditions under which they are likely to occur. Institutions are
divided into efficient (those that promote the interests of all or
almost all the actors) and redistributive (those that promote the
interests of one coalition against another). The latter issubdivided
into consolidating institutions (institutions designed to promote
the winners' interests) and new deal institutions (institutions designed
to split existing coalitions and transform losers into winners).
I argue that theorizing about institutions has usually been
confined to only one of these three cases, and has not been extended
to all three. Failure to understand the complex nature of
institutions has generated incorrect extrapolations and inferences
about them. Some authors (mainly Marxists) see institutions exclusively
as redistributive;others (mainly economists) see them as
exclusively efficient. Finally, I specify the conditions under which
efficient or redistributive institution building prevails. Each of the
subsequent empirical chapters of the book presents more systematically
one example of each category of institution.
I then apply the theoretical framework defined in Chapters z, 3,
and 4 to three different political phenomena in three different
countries: party politics and relations between leaders and activists
in the British Labour party, consociationalism and institutional
design in Belgium, and electoral politics and coalition cohesion
in the French Fifth Republic. The cases were selected for their diversity
in order to demonstrate the logical coherence, substantive
versatility, and empirical accuracy of the nested games framework.
The book as a whole adopts a "most different systems design"
(Przeworski and Teune 1970). Three very different cases in Western
European politics are studied. They involve different actors,
concern different countries, and focus on different subject matters.
In all these cases, some simple propositions about rational beThis
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14 Nested Games
havior apply: changes in payoffs or institutions lead actors to
modify their choice of (equilibrium) strategies. Consequently, political
context and political institutions matter in predictable ways.
The chapters are presented in order of increasing complexity.
Chapter 5 focuses on the interaction between masses and elites in a
competitive electoral context. The principal game is the interaction
between Labour members of Parliament and their constituency
activists, and this game is nested inside a game of electoral competition
between parties. Chapter 6 adopts the reverse perspective.
The principal game is the interaction among elites; this interaction,
however, is influenced by the interaction between each
political elite and the masses it represents. The principal game is
parliamentary, and it is nested inside a game between elites and
masses. Chapter 7 deals with the more complicated situation in
which four parties are organized in two coalitions, and each party
has to take several arenas into account: the game at the national
level, the competitive game among coalitions at the constituency
level, and the game between partners at the constituency level.
With respect to institutional design, Chapter 5 presents the case of
redistributive institutions of the new deal type, Chapter 6 demonstrates
how efficient institutions work, and Chapter 7 shows how
different winning coalitions adopt different consolidating institu-
tions.
Chapter 5 deals with party politics and the relationship between
leadership and party activists. Labour party constituencies occasionally
revolt against their MPs and replace them for being too
moderate. Sometimes, in the subsequent election, Labour loses the
seat. Such suicidal behavior is problematic inside a rational-choice
framework. The phenomena of readoption conflicts and their destructive
consequences are studied as a repeated game between constituency
activists, standing MPs, and Labour party leaders, which
is nested inside the competitive game between the Conservative
and Labour parties at the constituency and national levels. The
activists' apparently suicidal behavior is explained as optimal in
this nested game because they are concerned with building a reputation
for toughness that will deter their representatives from
being moderate.
The nested games framework explains why previous empirical
studies (particularly studies that try to assess the relative strengths
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Nested Games and Rationality 15
of constituencies and leaderships by examining the frequency of
readoption conflicts or their outcomes [Janosik 1968; McKenzie
1964; Ranney 1965, 1968]) focus on the wrong explanatory variables
and thus come to dubious conclusions. Moreover, the nested
games framework reveals the importance of the institutional
changes made under pressure from constituency activists between
1979 and 1.981. Contrary to the existing literature (Kogan and
Kogan 198x5 Williams 1983), I argue that the major change in the
Labour party was the shift to the left in the political preferencesof
the trade unions in the 19705 and not the subsequent institutional
modifications that reflected and crystallized this shift.
Chapter 6 deals with the question of consociationalism and
institutional design. According to the consociational literature
(Lehmbruch 1974; Lijphart 1969, 1977; McRae 1974), deep political
and social cleavages do not lead to explosive and unstable
situations as long as political elites are accommodating. Other authors
(Billiet 1984; Dierickx 1978) claim that what explains the
accommodating behavior of elites in consociational countries is
the possibility of package deals across issues: for issues of asymmetric
importance, vote trading is possible. If these explanations
were correct, there would be two consequences. First, there would
be no reason for elites to initiate political conflict. Second, there
would be no need for consociational institutions, that is, institutions
specially designed to minimize conflict. Both the initiation of
conflict and consociational institution building seem to be suboptimal
activities according to these theories.
In order to explain these puzzles of suboptimal behavior, I use
the nested games framework. I study Belgian political elites as they
are involved in nested games. They play the parliamentary game
among themselves while each elite is involved in a game with its
followers. This game between each elite and the masses it represents
influences the payoffs of the parliamentarygame. I argue that
the behavior of political elites is optimal within the nested games,
even though it may not be optimal in either game considered in
isolation, and I show that optimal behavior in the nested game
sometimes entails the initiation of conflict by elites. I provide a
consistent explanation of the design of Belgian institutions. Finally,
I use the nested games framework to account for the actors'
calculations and the failure of the negotiations concerned with the
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16 Nested Games
Egmont Pact, which was intended to resolve the status of Brussels
in 1977.
Chapter 7 deals with electoral politics and coalition cohesion in
the French Fifth Republic. The French electoral system requires
cooperation and coalition formation among different parties in the
second round of the elections. Inside each coalition, the party that
arrives second in the first round has to transfer its votes to the
winner in the second round. How effectively are parties going to
transfer their vote to their partner in the second round?
Spatial models of voting and party competition (Bartolini 1984;
Rosenthal and Sen 1973, 1977) predict the following: Communists
will vote socialist in the second round because Socialists are
more to the left than the right-wing parties. But Socialists will not
be stable allies for the Communists because the Socialists do not
necessarily feel closer to the Communists than to the right-wing
parties. Therefore, Socialists enjoy a "positional advantage" over
Communists in electoral politics and coalition building (Bartolini
1984, no). Similar arguments can be made for the right-wing
parties. Because their ideological distance is smaller than that between
Socialists and Communists, the transfer of votes will be expected
to be better inside the Right than inside the Left. However,
in reality, all parties intermittently transfer votes. Why would parties
prefer to give a seat to the rival coalition instead of helping
their partner win?
To explain this suboptimal behavior, I consider the game between
partners at the national level as nested inside the competitive
game between coalitions and the game between coalition
partners at the constituency level. The conditions prevailing at
the local level determine each player's payoffs, and the payoffs
determine the likelihood of cooperation. The conclusion of the
nested games approach is that vote transfers are determined by the
balance of forces in a constituency. This balance includes the relative
strength of the coalitions and the relative strength of the partners
inside each coalition. The theoretical advantage of the nested
games approach is that it demonstrates that all parties obey the
same laws and behave in similar ways with respect to coalition
cohesion and vote transfers. Comparison of the nested games
approach with alternative explanations such as spatial models,
survey research (Jaffre 1980), and psychosociological approaches
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Nested Games and Rationality 17
(Converse and Pierce 1986; Rochon and Pierce 1985) indicates
several advantages of the approach: theoretical parsimony, consistency
with other existing theories, and descriptive accuracy.
The performance of the nested games approach in each case
study should not distract readers from the major point: all the
empirical cases, which range from coalition politics to party politics
and from questions of ideology to questions of institution
building, are applications of the same theory. The essential goal of
this book is to demonstrate that political context and political
institutions matter in predictable ways, to explain why such regularities
occur, and to provide a systematic way to deal with
complicated political phenomena. The emphasis is on the word
systematic because I hope the book makes this particular method
of study widely accessible. Making the production of knowledge
accessible is, I believe, an important goal for any scientific enter-
prise.
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