Preventing and Protecting: Reputation and the Design of International Cooperation

In collaboration with: Stefano Jud

We offer a systematic account of the effect of states’ reputation on the occurrence and design of international cooperation. When confronted with states with a bad cooperation reputation, i.e. states who reneged on their international commitments in the past, states have to decide whether to cooperate and, if cooperation is attempted, how to design it in order to mitigate costs and enhance benefits. The choice between formal and informal institutional arrangements allows states to reap the benefits of cooperation and to reduce the costs because it provides them with design elements that protect them from the costs of their partner’s defection. We test our argument using new data on formal and informal international institutions in the trade and commerce area in the period 1940 to 2014. We find that reputation has a strong impact on the occurrence and design of international cooperation and that this effect is shaped by power.