Behavioral Issues of Rationality in International Interaction

This study argues for a behavioral interpretation of rational choice in a changing environment that potentially restores the equilibria of discounted repeated games as useful descriptors of long-term bilateral relations between nation-states. The analysis reveals that all subgame perfect equilibrium strategies fall into one of three classes: countervailing, strongly inducive, or weakly inducive. Only strongly inducive strategies require knowledge of the opponent's exact strategy choice to achieve equilibrium. At the other extreme, countervailing strategies require only the expectation of some form of countervailing behavior from the opponent to become a rational choice. The intermediate weakly inducive strategies allow each side to choose some bound of tolerance for the opponent's actual behavior, permitting a range of countervailing behaviors within these bounds. The formal analysis provides constructive access to interesting subgame perfect equilibria of discounted repeated games and is suggestive of the observable and empirically testable consequences of rational behavior.