Pecuniary Externality, Ideology and Sphere of Influence

TL;DR

This paper develops a game-theoretic model to analyze how superpowers and non-superpowers compete for influence through ideology, revealing complex effects of externalities, dependence, and resource distribution on influence strategies.

Contribution

It introduces a formal model of ideological competition incorporating pecuniary externalities and collective agency, extending previous theories of leadership and influence.

Findings

Superpowers tend to compromise more when expanding their influence clubs.

Dependence among members reduces the superpowers' willingness to compromise.

Unequal growth among members can lead to contraction of influence clubs.

Abstract

We build a game-theoretic model to formalize Kindleberger's (1996) idea of the public good of leadership. Two superpowers use ideology to compete for influence by forming clubs whose members benefit more when their orientations are closer to the club's. Pecuniary externalities create complementarity among non-superpowers. Their collective agency forces superpower to compromise by choosing an orientation not aligned with its own. We find that superpowers compromise most when expanding their clubs but less as members become more dependent. Moreover, increased member endowments do not always enlarge the club; disproportionate growth by a few can instead contract it.