Agreements may require redesigning incentives, not just dividing gains

Evidence

Bargaining may have to concern itself with an “incentive” system as well as the division of gains. Oligopolists may lobby for a “fair-trade” law; or exchange shares of stocks. An agreement to stay out of each other’s market may require an agreement to redesign the products to be unsuitable in each other’s area. Two countries that wish to agree not to make military use of an island may have to destroy the usefulness of the island itself. (In effect, a “third-party commitment” has to be assumed when an effective “second-party commitment” cannot be devised.) — Thomas C. Schelling, The Strategy of Conflict, 116

Categorization

• XREF: Third-party commitment as substitute for second-party commitment echoes how the Mafia destroys alternatives to make defection impossible. — connects to: Institutions can mimic encapsulated-interest incentives to substitute for ongoing relationships.; Cooperation can occur without trust when incentives align; Mere incentive compatibility is insufficient for trust as encapsulated interest (+1 more)

Broader Connections

• Institutions can mimic encapsulated-interest incentives to substitute for ongoing relationships. #corroborates (0.75)
• Cooperation can occur without trust when incentives align #expands (0.75)
• Mere incentive compatibility is insufficient for trust as encapsulated interest #complicates (0.72)