Incentive and Screening under Objective Uncertainty: A Model of Cooperation with Randomly Distributed Payoffs

One of the most salient obstacles that plague international cooperation is information problem. Actors involved in cooperation maintain private information regarding their preference, capability, and behavior, all of which make cooperation difficult to achieve due to lack of trust and exacerbated opportunist tendency. Existing cooperation scholarship, most importantly works by institutionalist, has been advocating the role of international institutions in facilitating cooperation through promoting transparency and symmetric information. In actuality, however, not every single international institution is successful in enhancing information transparency among sovereign states. Interestingly, while promoting transparency and information symmetry among cooperating actors is usually difficulty, scholars do observe that under some circumstances cooperating states are voluntarily willing to maintain high level of transparency, even without being compelled by external mandate international institutions. Such irregularity in reality raises two questions to cooperation scholarship. The first question is, what determines the level of policy transparency that states maintain when cooperating internationally; the second question is, what effect do formal international institutions ∗333 UCB, Boulder, CO 80309. E-mail:[email protected]