Thursday, July 18, 2013

The Missed Opportunity Model: Mideast Negotiation as a Two-Level Game

"About the time we can make the ends meet, somebody move the ends"
  - Herbert Hoover 

Israelis and Palestinians always say they want to negotiate for peace but it somehow never happens.  That's because supporting negotiations is almost always good politics, but actually negotiating is not.  Here's why.

The News

News that the Palestinian Authority did not approve Secretary of State Kerry's plan for renewed Mideast peace talks is disappointing but not particularly surprising.  Many Secretaries of State have tried and failed before to bring Israelis and Palestinians to the negotiating table.  In the coming days, Secretary Kerry will likely try to salvage the talks by framing the Palestinian rejection as a counter-offer to Israel.  However, Prime Minister Netanyahu is unlikely to agree to the Palestinian demands: Negotiations based on the 1967 lines, releasing Palestinian prisoners, and stopping settlement building.

The Puzzle

More difficult to understand is the sudden switch from cautious acceptance to what is more or less a rejection of the plan.  Signalling early enthusiasm only to switch to stonewalling is a pattern that plagues Mideast peace negotiations.  As early as this morning, news reports indicated the Palestinian leadership might look favorably upon the plan, which also has the backing of the Arab League.  Yet later today the plan was met with indecision from the Palestinian leadership.  

This particular incident is likely a matter of internal divisions in Palestinian politics.  But these switches (which are not unique to the Palestinians) are puzzling.  Why do Israeli and Palestinian leaders indicate a willingness to engage in peace talks only to stonewall later?  

Stonewalling is understandable.  Domestic constituencies, radical groups on both sides, and the prospect of likely failure are rational deterrents.  But given there challenges, it's puzzling that leaders express enthusiasm in the first place.  This morning, Palestinian President Mahmoud Abbas said the Palestinians were keen on making Secretary Kerry's mission succeed and called today's meeting "urgent."  Israeli Prime Minister Benjamin Netanyahu has been equally enthusiastic.  On Sunday he called President Abbas and expressed hope for a resumption in peace talks.  What explains this enthusiastic rhetoric?

Partial Explanations

Western pressure plays a role.  Neither Prime Minister Netanyahu or President Abbas has an incentive to say no to Secretary Kerry on the principle of peace talks given each side's relationship with the US.  But the Secretary's extensive time in the Middle East (6 trips in 6 months) and an extension of his current trip show that this is more than just rhetoric.  No doubt, he has discussed the specifics with both sides and asked for informal guarantees.  Given this drawn out process, jumping right to stonewalling would be politically feasible for both leaders.  This explanation is insufficient on its own.

Partisan politics plays a role as well.  Naftali Bennet, leader of Israel's right-wing HaBayit HaYehudi party has threatened a coalition crisis over negotiations with the Palestinians.  On the Palestinian side, Hamas has flatly rejected peace talks, calling them a "waste of time."  However, if partisanship were the main issue, both leaders could have been more pessimistic.  Cautious pessimism is a popular position among those who are party to the conflict, and it would have mitigated the blowback from the more partisan fringes now sounding off.  This explanation too is insufficient.

The Missed Opportunity Model

At the Geneva Peace Conference in 1973, Israel's Foreign Minister at the time Abba Eban remarked, "The Arabs never miss an opportunity to miss an opportunity."  The quote has become a common platitude among the pro-Israel crowd and sums up a strategy which both Israelis and Palestinians have used to avoid actual negotiations.  This strategy produces the best outcome for the rational incentives given by what I will call the Missed Opportunity Model.

In 1995, Professor James Fearon wrote a groundbreaking article about bargaining and war.  He asked why countries go to war when it's against their interest.  His answer is that for a bunch of reasons, both sides bargain too hard.  Fearon's model is game theoretic and full of algebraic proofs, but it is essentially a fancy venn diagram:

James Fearon, "Rationalist Explanations for War," International Organizations 3 no. 49 (1995): 387

The model is pointing out that when either Country A or Country B's offer falls outside the other's bargaining range, it becomes less costly to fight the war than to continue bargaining.  The set of all possible offers where both sides win the game is aply called the win-set.  It's all values inside the bargaining range, which is all kinds of awesome.

To make this model applicable to Israeli-Palestinian negotiations, let's change two rules of the game.  First, instead of bargaining over war, the two sides are bargaining over a peace agreement.  This agreement involves costly concessions by both sides that neither is thrilled to make.  In other words, the win-set is now a lose-set.  Long-term benefits aren't irrelevant but let's assume they're not the most important thing at the moment.  Second, let's make this a two-level game.  The bargaining model is the second level.  The first level is a game in which supporting bargaining in and of itself carries a positive payoff for both sides, with a slight benefit if both sides are bargaining and a slight loss if one side rejects but the other side supports negotiation.  Here's the payoff matrix for the game-theory inclined (I welcome your improvements wholeheartedly).

This is a slightly modified Battle of the Sexes payoff matrix.  It's saying the best strategy for each side is to support negotiating since doing so always carries a payoff.  

The actual negotiating, however, inherently involves a loss.  By definition, negotiation means you give up something. That means that in the entire two-level game, your best strategy is to support negotiation but not actually negotiate.  It's like signing up for a subscription that gives you a free toaster for doing so, cancelling the subscription, and keeping the toaster. 

For this scheme to pay off however, you need to cancel the subscription before you get charged.  This is what Israel and the Palestinians do in negotiations.  In Fearon's model, the players will bargain as close to the outside of the other side's best offer without falling outside it.  In the Missed Opportunity Model, both sides will bargain as close as possible to the outside of the other side's best offer without falling inside it.  Missed opportunity isn't a mistake, it's a strategy. 

In fact, you could try to lure the other side into your bargaining range by obfuscating your true best offer and enticing your opponent.  With enthusiasm. And signalling a willingness to negotiate.

This explains, along with the factors mentioned earlier, why both Israel and the Palestinians begin rounds of talking about negotiation with willingness and enthusiasm, only to stonewall.  Talking about bargaining gets each side political capital.  They then stonewall to avoid the cost of actual negotiations and keep the payoff supporting negotiation.

What does all this mean for the US?

Given this model, Secretary Kerry's best strategy is to push each side to improve their best offer but not tell the other side exactly what that offer is.  By engaging this two-level game, Secretary Kerry can then move each side into the others' bargaining range, ensnaring them into actual negotiations.  Given the ongoing and private negotiations, it appears Secretary Kerry is playing the game well.  The question is whether the actual values for each of these variables will lead to ensnarement in negotiations when the theoretical rubber hits this empirical road.


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