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Embracing the Enemy

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Listed:
  • 'Alvaro Delgado-Vega
  • Johannes Schneider

Abstract

Two agents repeatedly compete for the power to set policy. A principal partially influences the power allocation. All three players may disagree on policy, but one agent (the ``friend'') aligns more closely with the principal than the other (the ``enemy''). The principal's optimal contract aims to exclude the enemy initially. However, once the enemy gains power, the principal embraces him, trading power for policy moderation. Moreover, the principal leverages the enemy's moderation to move the friend's policies toward her bliss point. If her commitment is strong enough, a principal offers more embrace to the enemy when her friend is close.

Suggested Citation

  • 'Alvaro Delgado-Vega & Johannes Schneider, 2024. "Embracing the Enemy," Papers 2406.09734, arXiv.org, revised Jul 2025.
    • Handle: RePEc:arx:papers:2406.09734
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    File URL: http://arxiv.org/pdf/2406.09734
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    References listed on IDEAS

    as
    1. Callander, Steven, 2008. "A Theory of Policy Expertise," Quarterly Journal of Political Science, now publishers, vol. 3(2), pages 123-140, July.
    2. Kfir Eliaz & Ran Spiegler, 2020. "A Model of Competing Narratives," American Economic Review, American Economic Association, vol. 110(12), pages 3786-3816, December.
    3. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, Decembrie.
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