Ahn, T.K.. and Loveless, Matthew - Game Theory and Democratic Transitions Modeling and Theoretic Re-Consideration of Przeworski's Democracy and the Market

8/8/2019 Ahn, T.K.. and Loveless, Matthew - Game Theory and Democratic Transitions Modeling and Theoretic Re-Considerat

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Game Theory and Transitions

Game Theory and Democratic Transitions:

Modeling and Theoretic Re-considerations of Przeworskis Democracy and the

Market.

By

Matthew Paul LovelessDepartment of Political Science

Indiana University

T.K. Ahn

Department of Political ScienceFlorida State University

January 1, 2004


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Game Theory and Democratic Transitions: Modeling and Theoretic Re-considerations of

Przeworskis Democracy and the Market.

Abstract:

Several authors have used game theory to analyze the strategic interaction of the

competing groups of democratic transition as an analytical tool to clarify the strategies

and beliefs of the actors. Most prominently, Przeworskis game theoretic analysis of political liberalization in authoritarian regimes that models the strategic interaction of

civil society and liberalizers has provided much of the theoretical groundwork. This

paper demonstrates that by treating and solving his original game as one with incompleteinformation we may gain a better understanding of the role of uncertainty in the process

of democratic transition. This examination highlights the subsequent game theoretic

improvements to Przeworskis model and some of the critiques of the theories employedby his model. Employing equilibrium refinements to earlier models, we posit and solve a

model of the game incorporating uncertainty. The game is then used as a model ofnegotiated transition in Eastern Europe.

Keywords: Game theory, democratization, Bayesian equilibrium, Eastern Europe

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I. Introduction:

In Democracy and the Market, Przeworski puts forth a model of political

liberalization that found wide acceptance among scholars in the post-1989 political world

(1991). On the heels of the fundamental political reforms taking place in the former

Soviet Union and during the on-going democratization process of Latin America,

Przeworskis model of a transition from an authoritarian regime to democracy highlights

the strategic interaction between members of the former regime and members of civil

society. His use of game theoretic analysis is appropriate and fertile for evaluating the

transactional and interactive strategies of political transitions as he argues that democracy

is ultimately an equilibrium for self-interested players (24). While theories of transition

have included top-down, bottom-up, domestically and internationally induced models of

political change, Przeworski asserts that democracy is an equilibrium for competing

actors as rational adherence to democratic political rules is consistent with self-interested

behavior despite being a suboptimal equilibrium (17). Rather than ascribing this

adherence to a set of norms or some exogenously imposed social contract, players,

particularly losers, in the political arena of democracy, continue to play the game as the

prospect of eventually winning dominates a strategy of deviating from the institutions

(selecting second order preferences in order to continue play).

This research attempts to show that by treating and solving the game as one with

incomplete information we may gain a better understanding of the role of uncertainty in

the process of democratic transition. In doing so, this will open the possibility of

constructing more interesting models to address not only the impact of uncertainty on this

political phenomenon but also to gain some insight into the process of democratic

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transition. Incomplete information, formally represented as uncertainty, influences the

game by including civil societys uncertainty about the type of elite that they face.

Przeworskis model of liberalization from an authoritarian regime is in fact an excellent

use of formal modeling in attempting to further understand and analyze the interaction of

competing players. It does, however, fail to incorporate components that can provide a

more robust analytical examination.i

II. Discussion of Przeworskis model and Theoretical Considerations:

Przeworski focuses on the liberalizers as the pivotal actor such that his analysis of

how transitions occur centers on the changing preferences and subsequent strategy

decisions made by the varying types of liberalizers. He first posits that in one situation,

liberalizers are actually proto-democratizers who mislead hardliners in order to reach the

increased expected payoff that is a result of reforming with an organized civil society

(60). In a second scenario, he argues that liberalizers are not proto-democratizers but

realize that repression is more costly than acquiescence, resulting in transition as the

default response to an organized civil society. He suggests that the second of these

requires liberalizers to endogenously change their preferences (become more humane) or

simply overestimate their post-electoral chances (65). Although he introduces the notion

of changing beliefs, he does not attempt to formalize this within his model.

Early in the chapter, he mentions that during the unfolding of this game, events

can take place that can affect the outcome (57). He cites the examples of the popular

mobilization of civil society that might signal to liberalizers that they are willing to

participate or that a split occurs in the regime, signaling an opening that civil society

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can exploit. In terms of formal analysis, his model does not incorporate these various

signals that can be included in the structure and subsequent play of the game. In our

opinion, Przeworskis separation of the two competing models of authoritarian

withdrawal is theoretically and computationally unnecessary. In order to combine them,

we can introduce incomplete and asymmetrical information to incorporate the complete

calculus of strategic decision making for civil society while retaining the internal

consistency of the model. This concatenation provides us with a more accurate model of

the interaction between the competing sets of players. Secondly, signaling, whether a

function of separating equilibrium or actions not captured in a players strategy profile,

can shape the equilibrium possibilities by changing the credibility of threats, implicating

preferences, or simply providing information to players.

As an approach to democratic transition, Przeworskis model of authoritarian

withdrawal divorces the process of strategic interaction among competing groups from

the catalysts of transition, international pressures, and the economics of reform (see

Ekiert 1991). The context of this strategic interaction can affect the authoritarian

withdrawal process such that impending economic failure (the former Soviet Union), an

overt military presence (South and Latin America), intra-national disintegration (Africa

and the former Yugoslavian states) impact the choices and strategies available to both

regime liberalizers and civil society (if one exists). Despite this, as a model of the

transactional nature of negotiating a transitional process, Przeworskis model has been

and remains theoretically and empirically tractable.

Przeworskis construction of the game reflects di Palmas crafting of democracy

such that elite actors can frame democracy as the best alternative for all players (1990).ii

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Nonetheless, Przeworskis analysis of political liberalization is clearly an elite bargaining

model of democratic change as pacts and concessions (the bargaining process) are

designed to gather the strength of mobilized actors or politically disarm them. While

process oriented arguments support this approach, many transitions are not negotiated

(i.e. top-down) transitions (see Bova 1991). Huntington posits that for democratization to

occur, economics makes transition possible but elites actions to thwart or encourage

transition make it legitimate (1991). Like both Przeworski and di Palma, Huntington is

unable to ignore agency in the process of democratization as the relative power of

reformers, moderates, standpatters (hardliners), and extremists shape the process of

democratization. Although, he suggest that opportunities for transition are not entirely

economic as internal crises, such as a shift in the general political stance of elites (by a

change in guard or of heart), can reach sufficient salience to bolster a split in the regime,

lending theoretical credibility to Przeworskis model. In light of the bargaining

conceptualization of the transition process, the contest between elites and civil society

varies between a zero-sum game between hard-liners and civil society and a positive-sum

game of reformers within the elite and civil society.

Given the interpretation of democratization as a unilateral, elite-driven process,

the inclusion of civil society in this transitional process as an interactive actor is not new

(ODonnell and Schmitter 1986; Huntington 1991; Sutter 1995; McAdam et al 1996).

More specifically, for Huntington, while civil society cannot initiate a democratization

process (although it can certainly serve as a catalyst), regime initiated transitions (elite-

driven) are more likely to be successful and peaceful (1991). Relatedly, and as mentioned

before, the unitary actor approach for regimes and civil society can prove to be

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problematic. However, the impact of civil society in the strategic interaction of transition

(in contrast to the strictly reactive role it has been argued to play) confronts the

assumption of a unitary actor. Even Przeworski has trouble allowing civil society to

remain monolithic. His secondary games consisting of varying player types demonstrates

how different types have different responses to demands and others strategies.

In nations transitioning from an authoritarian or totalitarian regime, a nascent civil

society emerges from a loose connection of disassociated groups and serves as one of the

limited viable sources of opposition (the military being another significant source). The

ability of these groups to form a coherent, if only vaguely unified, oppositional

movement allows for them to act in a strategic capacity by articulating collective

demands (via a process of bargaining or negotiating). Additionally, for Przeworski,

regime types are demarcated along a continuum of commitment to liberalization. To the

degree that a regime, or its constituent members, adheres to the emergence of civil

liberties, participation, popular representation, and political accountability reflect its

type. Although an intuitive division, does this provide a clear, empirical referent for

scholars to identify? Again, as Gates and Humes attempt to incorporate into their revised

model (1997), beliefs of both the liberalizers and civil society do change in this game.

Although some have argued that elite commitment levels may not be relevant (Young

1992), it may be theoretically more accurate to consider the less committed Liberalizers

as strictly Liberalizers and the strongly committed Liberalizers as essentially

Democratizers. Liberalizers within the regime can be divided into factions, hardliners and

liberalizers as can civil society, into Moderates and Radicals.

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In this examination, for an assumption of a unitary civil society, we define it

procedurally. Rather than identify its constituent parts, we can define civil society along

the dimension of its common enemy and its role as a non-governmental player (or

buffer to the state). What then do the constituent members of civil society commonly

share? Democratization does not differentiate along the strength of civil society but rather

the commitment levels. Pivotal to civil societys role is its capacity to bind diverse

elements of a nascent if not wholly non-existent civil society during the period of

transition. However, for civil society to be a unitary actor, the definition of a common

goal is merely probabilistic. The actors subsumed under the very broad title civil society

are likely to have a wide dispersion of beliefs about reform, such that some may believe

that centralized socialism is the appropriate form of governmental structure but is poorly

implemented. Civil society as a latent, yet potent, meso-level, extra-political structure is

problematic as well. The presence of a functioning, organized, and non-state entity to

counter and respond to the regime fractionalization is an optimistic assumption.

Although several studies have cited the existence of a proto-civil society prior to

1989 in Eastern Europe (see Bernhard 1993, di Palma 1991, Evans and Whitefield 1995

to name just a few), that it would be capable as a unitary actor may be a tenuous

assumption. For this model of the interaction between civil society and varying regime

types, civil society need not necessarily be well-defined or developed but requires some

coherency (capability for unified action). For this game, we will assume that the set of

strategies posited at the beginning of the game are the exhaustive set of strategies

available for each actor. Again, civil society is not seeking to replace the state, only to

create the opportunity for a political opening. It is possible that for many nations, an early

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rallying point for civil society was provided by international agreements on new norms of

respect for human rights, the third basket of the 1975 Helsinki Agreement. Dissidents in

Latin America, the Soviet satellites, and China all used this as an impetus for

organization and ultimately opposition. For the countries of Central and Eastern Europe,

these organizational networks coupled with the euphoria of potential regime change

given the demise of the Soviet Union, may have provided enough initial cohesiveness

among these groups to promote a unified response. For many of them, encouragement in

the form of international diffusion of the potential impact of civil society (the

demonstration effect) and the simultaneity of transitions served as a necessary but not

sufficient condition for collective oppositional action.

Przeworski eventually address the heterogeneity inherent in the two main actors

(the regime and civil society) and Gates and Humes also add this to their re-examination

of his model, adhering to the theoretical importance of these factional divides within the

two groups (ODonnell 1979, ODonnell and Schmitter 1986, although they use the term

soft-liners). At the occurrence of a split in the regime, an outpouring of meso-level

activity signals to hardliners and liberalizers alike about the possibility of reversal. This

also varies according to geo-political regions as authoritarian regime equilibrium is based

on whether the regime draws its legitimacy from force or provision (i.e. fear or

performance, the latter usually being economic). However, if a proto-civil society

emerges and develops spontaneously, the probability of an effective repression lessens.

There remains the challenge that the rules of transition may differ from normal

science; such that the process, players, actions (or strategies), and rules of transition lay

at the margins of theories explaining what causes transition and what consolidates the

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resulting regime. For game theorists, this liminal stage between more continuous political

modes of existence challenges their assumption of rule and, ultimately, game constancy.

A collective response of game theorists has been to incorporate some of these

deficiencies in the form of players possession of incomplete information (as our model

does). Incomplete information impacts the outcome of the game as both civil society and

elite devise strategies that account for their uncertainties about the game.

Similar to many scholars at the time, Przeworski also makes the implicit argument

that liberalization is democratization. Consistent with a large portion of the transitions

literature, the normative assumption of eventual political and economic order rarely

questioned such that transition away from authoritarianism is not necessarily transition

toward democracy. Bunce was one of the few scholars who, during the initial periods of

transition of the former Soviet Union, continually argued that political liberalization is

not necessarily democratization and that the notion of transition as a single path or a

deterministic trajectory is misleading (1990). Liberalizers within the regime may not

necessarily assume that what is wrong with their system requires a new one. Therefore,

should we simply assume that what was wrong with authoritarianism can and will be

fixed by democracy? The two processes of liberalization and democratization are

different (a good example being Gorbachevs intentions in the mid-1980s versus the

eventual collapse of the former Soviet Union).

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III. Uncertainty in Other Models of Transition to Democracy:

Other scholars have sought to operationalize Przeworskis model of liberalization.

Sutter introduces the notion of pacting into the transition game, concerning the process of

dealing with out-going elites and their potential to renege and re-intervene in the

transition process (1995). His later work posits a unitary regime and opposition actors

with complete, symmetrical information (2000). Rather than confront the unilateral action

of top-down or bottom-up transition, he argues that transitions are the outcomes of

mutually agreed upon changes. While he seeks to define the conditions necessary to bring

about founding elections, the utilities derive from the gains from transition (2000, 70).

He mentions but ignores the liberalization effect of the opposition that gains power

during the process of transition, especially if the regime cracks. Although the regime

consists of hardliners and reformers and the opposition consists of moderates and

radicals, he posits that they interact as unitary actors (regime and opposition) pivoting

primarily on the actions of only the moderates and reformers. Although others have done

the same (Gates and Humes 1997, see below), some authors suggest that the interplay of

these factions is important, ultimately modeling this as a four player game (see Colomer

1995). As do many transitionologists, he isolates the game from international forces and

models it as a purely domestic process. Swaminathan asserts that peaceful transitions

occur at points of relative power parity between incumbent regimes and civil society

(1999). His interest is to explain variation between peaceful and conflictual regime

change rather than the initiation of transition.

However other examples demonstrate that the impact of international factors can

provide insights into the beliefs and ultimately actions of players as Zielinski incorporates

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the threat of a Soviet invasion into Poland into the game of transition (1995). In later

work, Zielinskis assessment of miscommunication between incumbent reformers and

civil society (or maybe more appropriately, simply unintentional mis-signaling by elites)

about the prospect of peaceful political liberalization examines historical accounts of

attempted transitions from authoritarian rule (1999). He makes the explicit assumption

that hard-liners are the military (1999, 214). What differentiated the mid-1950s from the

1980s push for reform in both Poland and Hungary was the explicit decision of Soviet

non-intervention in the latter time period. Without this threat of external power (in the

form of military-backed repression), regime elites were left to their internal battles of

transition.

Gates and Humes (Chapter 5, 1997) examine Przeworskis model incorporating

uncertainty while still adhering to the underlying theoretical principles. They are

particularly interested in the role of complete and incomplete information in the

transitions to democracy. They introduce the notion of Nature as the formal introduction

of incomplete information (Harsanyi 1967). This contributes to Przeworskis original

model in two ways. First, it allows for the existence of varying player types for

Liberalizers and secondly allows for players to know payoffs but suffer from uncertainty

about the move Nature has made. This gives Gates and Humes the advantage of

incorporating actual payoffs that equal Przeworskis varying outcomes of his different

models while still controlling for the uncertainty of player types.

They divide their analysis into three parts. In the first part they insert values into

Przeworskis ordered preferences and look at the outcomes, changing payoffs to see

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differing equilibrium. In the second part, they posit liberalizers that can be more or less

committed to reform and civil society does not know which it is facing (introducing

Nature). This also introduces the missing notion of signaling (liberalizer player types). In

the third part, they introduce three types of liberalizers: more committed, less committed,

and those affected by r, incorporating the entire argument into a larger game of

incomplete information in which Civil Society does not know the Liberalizer type.

Similar to Przeworski, they discuss the prospect of repeated games and the notion of

reputation. These games are repeated in that any chance for Liberalizers to side with

hardliners is an expression (a signal) about their beliefs of the game building a reputation

for regime unity. Although the game above could be played repeatedly to take advantage

of cooperation, Przeworski correctly argues that this cannot be a repeated game as

continued negotiations with divisions within the regime are most likely not to occur

frequently.

Following Gates and Humes, we assign cardinal values from 5 to 1 to the

outcomes such that a higher payoff signifies an outcome is more preferred by an actor.

Civil societys preference is fixed, i.e., we only posit a single type of Civil Society:

Transition(5)>BDIC(4)>Insurrection(3)>SDIC(2)>NDIC(1). So the problem is the

uncertainty regarding the Liberalizer's type, i.e., liberalizer's preference ordering. Gates

and Humes posit three types. All of the three types most prefer BDIC and least prefer

INSURRECTION. Their difference therefore is ordering among three remaining

outcomes of SDIC, NDIC, TRANSITION.

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Given the three types of Liberalizers, there are four possible ways of constructing

a game of incomplete information. Three of them involve two types of Liberalizers and

one involves all three types of liberalizers. Gates and Humes present two of them: a game

with more and less committed liberalizers (1997, 126: Figure 18), and another with all

three types of liberalizers (1997, 128: Figure 19).

While Gates and Humes construction of the incomplete information game

represents a significant progress in game-theoretic modeling of democratic transition,

they unfortunately do not apply the solution concepts for such incomplete information

game correctly. Specifically, they treat the incomplete information game as if it were a

concatenated complete information games. For example in their model with more and

less committed Liberalizers, they present the equilibrium in following manner. If Nature

determines liberalizers to be less committed, the equilibrium is, if nature determines

liberalizers to be more committed, then the equilibrium is (127).

The equilibria are mere restatement of the subgame perfect equilibria stated above

for the complete information games. It simply asserts that depending on the liberalizers

types different outcomes are possible. A correct statement of the perfect Bayesian

equilibrium of the game must take a form of, {less committed liberalizers strategy, more

committed liberalizer's strategy; Civil Societys strategy: Civil Societys belief}. A

strategy for a player assigns an action to each of its information sets. A belief is a

probability assessment of a player in an information set with multiple nodes. A perfect

Bayesian equilibrium requires two conditions. First, strategies should be rational given

beliefs, i.e., the sequential rationality. Second, beliefs should be calculated, on the

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equilibrium path, from the Natures move probabilities and the equilibrium strategies via

Bayes rule.

The perfect Bayesian equilibrium of the incomplete information game with two

types, posited by Gates and Humes, is rather straightforward. Regardless of the value of

r, Liberalizers of either type chooses to reform in its final decision node. Therefore the

Civil Society has the dominant strategy of organizing once its information set is reached

no matter what its belief in the information set. For the less committed Liberalizer, then,

the expected utility of staying is 4 and that of opening is 3. On the other hand, for the

more committed Liberalizer, the expected utility of staying is 3 and that of opening is 4.

The only perfect Bayesian equilibrium of this game, thus, is a separating equilibrium that

can be stated in a sequence of {less committed Liberalizers strategy; more committed

Liberalizers strategy; Civil Societys strategy: Civil Societys belief that the Liberalizer

is a more committed type given that the Liberalizer opens}:

{(stay, reform); (open, reform); organize:1}

The restated perfect Bayesian equilibrium of the game is unaffected by the initial

distribution of the two types. That is, how small or large the proportion of the less

committed Liberalizer is, the equilibrium strategies of the players are the same; and the

belief of the Civil Society in its information set is always 1. This is because the more

committed type of Liberalizer is the only type that opens the regime. Now we turn to

Gates and Humes equilibrium statement which is reproduced below exactly as it appears

in their book.

Case 1: {(stay with hardliners, reform), organize}. This equilibrium

exists if Nature determines liberalizers to be less committed. Case 2:{open, reform), organize}. This equilibrium exists if Nature determines

liberalizers to be more committed (1997, 127).

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As one can see, their statement is in fact two subgame perfect equilibria put

together. In spite of its technical inexactitude as an equilibrium statement, it is still valid

as description of possible outcomes (conventionally understood as realized actions) of the

incomplete information game, primarily due to the fact that the Civil Society has a

dominant strategy in its information set and as such the best responses of the two types of

the Liberalizers are straightforward.

This, however, is not the case with three types (1997, 128: Figure 19). While

Gates and Humes use x, y, and z to refer to the types of liberalizers, we use them to

denote the proportions of the types of liberalizers (or the initial, prior probabilities of the

types of liberalizers). It is rather critical since in this game, unlike the game above, the

initial probability matters. We first state the perfect Bayesian equilibria of the game as

functions ofr, x, y, andz and then elaborate and interpret them.

The perfect Bayesian equilibria are stated in the following manner: {less committed

Liberalizers strategy, more committed liberalizers strategy, least committed liberalizers

strategy; civil societys strategy: civil societys belief (the posterior probability

assessment the liberalizer is a certain type where by ls, m, and lt denote the posterior

probability assessment of the Civil Society that the liberalizer is less, more, and least

committed given that the liberalizer opens.)

In equilibrium zone I, where the probability of a successful repression is less than

or equal to , the separating equilibrium is the only equilibrium. The reason is as

follows. In the Liberalizers final information set, all of the three types of Liberalizers

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have the dominant strategy of reforming. Then, regardless of its belief, the Civil Society

prefers to organize. In the initial information set of the Liberalizers, then, only the more

committed Liberalizers open the regime.

The equilibria are a bit more complicated when the probability of a successful

repression is greater than or equal to . In both the zones II and III, that is, regardless of

the initial probability distribution among the three types of Liberalizers, there always

exists a separating equilibrium which is almost identical to the separating equilibrium in

Zone I, except that on the off-the-equilibrium path, the least committed Liberalizers

repress instead of reform.

However, in Zone III in which r is greater than or equal to and z, the initial

probability that the Liberalizer is the least committed type is greater than or equal to

12(1 )r+

, there is a pooling equilibrium. In the pooling equilibrium, all three types of

Liberalizers open and the Civil Society enters. Let us check the sequential rationality of

the strategies in this equilibrium. Given that the Civil Society enters, it is easy to

understand why all types of Liberalizers open. Therefore, the key question is whether the

strategy is also sequentially rational for the Civil Society.

If the Civil Society enters, the payoff is 4. On the other hand, if the Civil Society

organizes, there is a probability z that the Liberalizer is the least committed type and,

thus, will repress. Otherwise, i.e., when the Liberalizer is either more committed or less

committed type, the Liberalizer will reform, returning a payoff of 5 for the Civil Society.

Put them all together, we have the expected payoff for the Civil Society when it organizes

as . It is sequentially rational for the Civil Society to enter( 1 (1 ) 3) (1 ) 5z r r z + +

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if 4 is greater than or equal to the expected payoff of organizing, specified above, or

12(1 )r

z+

.

Notice that Zone III is the only area of the parameter combinations of (r,z)

whereby pooling equilibrium exists. If the pooling equilibrium is played and the realized

type of the Liberalizer happens not to be the least committed, then we have cases in

which the Civil Society enters the regime even though the Liberalizer would reform if the

Civil Society organized. This is the most unique feature of the incomplete information

game compare to the complete information games of democratic transition. That is,

because the Civil Society does not exactly know the type of the Liberalizer when the

latter opens the regime while the joint probability that an opening Liberalizer is the least

committed type combined with the probability that repression goes successful is high

enough, the Civil Society does not take the risk of organizing for fear of bringing about

the NDIC.

While this is a good story for the Liberalizers, uncertainty does not always benefit

the Liberalizers. Note that even when the pooling equilibrium exists, there always exists

the separating equilibrium in which only the more committed Liberalizer opens the

regime. In the separating equilibrium, the least committed Liberalizer stays for fear of

civil societys organizing. This is so even though the probability of a successful

repression is greater than a half. Compare this with the case of complete information

game in which the Liberalizer is of the least committed type. In that case, the least

committed Liberalizer opens the regime and the Civil Society, knowing that the

Liberalizer would repress if it organizes, enters the regime. But in the separating

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equilibrium of Zone III, the least committed Liberalizer stays because it fears the Civil

Society would organize not knowing the exact type of the Liberalizer.

In the pooling equilibrium, the more and the less committed Liberalizers obtain

their most preferred outcome free-riding on the threat posed by the least committed

Liberalizers. In the separating equilibrium of zone III, and if it happens that the least

committed Liberalizer is the type that Nature chooses, the players end up in an outcome

SDIC which is strictly Pareto-inferior to BDIC that could have been realized had the

information been complete.

It is hard to pinpoint the principle of error in Gates and Humes equilibrium

analysis of the game with the three types of Liberalizers. In addition, they do not provide

a clear equilibrium statement. We will briefly discuss the moment where their analysis

begins to fail. They state in an earlier phase of their analysis that [I]f Nature choosesx,

liberalizers will choose to stay with the hardliners (1997, 129). This is correct for

separating equilibrium, but not for the pooling equilibrium. The problem is that instead of

searching for mutually consistent strategy-belief pairs, using the concepts of sequential

rationality and Bayesian update, they wrongly assumes that the less committed

Liberalizers have the dominant strategy of staying. We will not further discuss the details

of the errors in their analysis; instead, we hope the readers can compare the equilibrium

analysis presented above and those in Gates and Humes.

Let us briefly discuss the perfect Bayesian equilibria of the other two possible

games with incomplete information: one with more and the least committed Liberalizers

and the other with the less and the least committed Liberalizers. They could be

considered as special cases in which the prior probability for a type of Liberalizers is

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zero. For the game with the more and the least committed Liberalizers, let us set y+z=1.

If r is less than or equal to , both the types reform rather than repress in the final

decision nodes. The Civil Society, knowing this, organizes whenever its information set

is reached. Then, in the initial information sets for the Liberalizers, the more committed

type opens and the least committed type stays. Therefore the perfect Bayesian

equilibrium is, in an order of {more committed Liberalizers strategy; least committed

Liberalizers strategy; Civil Societys strategy: Civil Societys belief that the liberalizer is

the more committed type given that the Liberalizers open},

{(open, reform), (stay, repress); organize: 1}.

The case with the less and the least committed Liberalizers is interesting in that

there exists a pooling equilibrium in which both the types stay with the hardliners. When

r is smaller than or equal to , the equilibrium is {(stay, reform), (stay, reform); organize:

0 lt1}. In this equilibrium, the Civil Societys information set is not reached and,

thus, the belief cannot be calculated using the Bayes rule. Instead, it is sufficient to

specify the range of belief that supports the sequential rationality of the Civil Societys

equilibrium strategy. In fact, in this case, the Civil Society has a dominant strategy of

organizing regardless of its posterior. Therefore the supporting range of belief is [0,1].

What ifris greater than or equal to and, thus, the least committed Liberalizer

represses when the Civil Society organizes. Given that the Civil Society organizes, it is

sequentially rational for both the types of Liberalizers to stay. What is necessary again is

to find the range of belief that supports the sequential rationality of the Civil Society. If

the Civil Society enters, its payoff is 4. If it organizes, its expected payoff is (1-

z)5+z(r+(1-r)3)= 5-2z-2zr. Therefore, it is sequentially rational for the Civil Society to

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organize if z is smaller than of equal to (1+r). Notice again that the belief cannot be

calculated using the Bayes rule because the information set is off-the-equilibrium path.

The equilibrium can be stated as follows: {(stay, reform), (stay, repress); organize: 0 lt

(1+r)}.

Another pooling equilibrium is the one in which both types open and the Civil

Society enters. The condition for this pooling equilibrium is the same as that with the

three types, i.e, 12(1 )r

z+

. A separating equilibrium does not exist with this combination

of two types. The reason is that the best responses of the two types of the Liberalizers to

the Civil Societys strategy are the same. If the Civil Society organizes, both types of the

Liberalizers stay; if the Civil Society enters, both types of the Liberalizers open.

IV. Evidence of Incomplete Information and Transitions in Eastern Europe:

We examine two new democracies that reflect the sequential process of

democratic transition. Of the Central and East European states that have recently

undergone democratization, both pre-transition Hungary and Poland demonstrated

significant intra-elite contestation over reform and respective civil societies that were

sufficiently organized to provide coherent responses. This may not simply be fortuitous

coincidence. Kitschelt et al (1999) argue for three modes of pre-transition communist

political organization in Central and Eastern Europe, which have had profound effects on

their post-1989 political trajectories. These varying modes of communist rule affected not

only the post-transition trajectories but also the nature of the transitions, shaping the

arena for conflict or cooperation, the players, and the distribution of resources.iii

Using their terminology, one institutional legacy, National-Accommodative

communism, provided a greater propensity to permit modest levels of civil rights and

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elite contestation at least episodically, while relying more on co-optation than repression

as ways to instill citizens compliance (24); such that, oppositional forces (many times

with nationalist undertones) were minimally tolerated rather than eliminated from the

public sphere. For our purposes here and in contrast to other countries with dissimilar

institutional legacies, National-Accommodative communism is mostly clearly congruent

with the negotiated transition modeled here in which opposition groups were able to

marshal sufficient resources and organization to effectively challenge (or achieve

negotiations with) regime incumbents (30). It seems that both Hungary and Poland may

have been institutionally advantaged in the pre-transition period for a negotiated regime

change between elites and oppositional civil society. These authors characterize both

Hungary and Poland as having been institutionally National-Accommodative, and

although they put Poland in the mixed category in Table 1.2 (39), they ascribeNational-

Accommodative institutional characteristics to it for the remainder of the book (for

example see Table 2.1; 61).

a. Pre-Transition Incumbent Elite Behavior

For this model, more committed and even less committed liberalizers may signal

civil society in such a way as to establish their player type and demonstrate that z is low.

Given the value ofr, least committed liberalizers know that there is a pooling equilibrium

that distorts the signal of the liberalizer type to civil society, affecting civil societys

beliefs about the value of z. The other liberalizer types know this as well and must clearly

demonstrate their player types (changing civil societys beliefs about ls,m, andlt).

At the beginning of the 1980s, elites in both Hungary and Poland, in fact, all

Central and Eastern European countries were faced with the dire consequences of

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continued centrally-controlled economic policies. In the following years, in response to

continuing wide-spread reactions to Polands deteriorating economy, then-president

General Jaruzelski created an economic package to address it through within system

means. Previously unheard of in a Communist country, in November 1987, it was

defeated in a national referendum. Not only did this present an ideological crisis for the

incumbent regime but also left Poland without means to manage the urgent and escalating

economic problems. Contributing to this downward economic spiral, in conjunction with

the Catholic Church and the peasantry, Solidarity organized and continued debilitating

strikes across Poland (Lewis 1998). Action, or the failure to act, by Polish elites had

reached a critical juncture.

At the national level, Hungary was facing the macro-economic reality of Kdrs

failing New Economic Mechanism (NEM). Initiated in 1968, it had failed to re-energize

Hungary, once the most industrially advanced among the Soviet satellites. A by-product

of the NEMs continuing failure was, during the decade leading up to 1989, a vibrant

second economy, commonly referred to as the goulash economy (Gati 1990). This black

market of relatively unrestricted trade, exchange, and barter was important economically

and politically as it laid the groundwork for a nascent civil society by creating

organizational networks among individuals and groups along which not only economic

exchange but also information and influence could flow (see Gray 1990). However, while

this alternative market-based form of exchange alleviated some pressure for Hungarians

from their macro-economic woes, at the end of the 1980s, Hungary (along with Poland)

continued to suffer economically from the enormous debt generated from their within

socialism economic experiments and foreign loans. Despite these economic failures, it is

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significant that both Hungary and Poland were able to interpret the signals from the

Soviet leadership to experiment not only with economic policy within the socialist state

but also with minor variations of political institutions (Jasiewicz 1998).

To this point, despite the Soviet leaderships steadfast Communist politics, its

ambivalence toward the within system economic experimentsiv

was a political

opportunity for incumbent elites. While incumbent elite hard-liners may have been

interested in sharing responsibility for the implementation of further painful economic

reforms, in effect, co-opting power rather than negotiating a power transfer; a national

economic approach may have provided reform-minded national elites the impetus and

opportunity for signaling their implicit disapproval of the ideological, political, and

economic status quo. Further, incumbent, reform-minded elites might have known that, in

initiating negotiations with civil society, they provided de facto legitimization of these

opposition groups. Either way, these experiments ultimately fostered state-society

relations in both Poland and Hungary through the process of sharing of political and

economic responsibility (Jasiewicz 1998, 168).

Politically, by the mid-1980s, a waning of ideological commitment to Soviet-

sponsored communism in Poland and Hungary had begun to emerge among groups of

national elites. Although direct proclamations might have been dangerous, symbolic

actions could signal this ideological drift. In both Poland and Hungary, national elites

began a process of rehabilitating long-dead national heroes as an attempt to regain fading

credibility of communism (Batt 1998). One clear example was the re-classification of

Hungarys 1956 revolution as a popular uprising rather than a counter-revolution (Batt

1998, 13). The Hungarian Parliaments sponsorship of this rehabilitation and

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acknowledgement of the real character of the uprising was clear evidence of growing

groups of national elites who refused to continue to accept Soviet revised national

histories.

In May 1988 in the Hungarian Parliament, incumbent elites symbolic actions

became increasingly pronounced as within party elections shifted many reform-minded

officials into power. Then-President Kdr was purged along with a majority of his

supporters, while many of newly-selected elites were responsible for having previously

set up the semi-oppositional group (Hungarys first opposition party) the Hungarian

Democratic Forum (MDF) and proto-opposition groups (Forum of Free Democrats and

the Federation of Young Democrats) (Jasiewicz 1998; Linz and Stepan 1996). Further

evidence of waning elite commitment to the Soviet backed regime continued to emerge.

Then-Prime Minister Miklos Nemeth invited Spanish consultants to visit Hungary in

order to describe in more detail their successful pacted transition from authoritarian rule.

By September 1989, elites ideological shifts away from Soviet-style communism was

evidenced as Hungary begun to dismantle the formidable iron curtain of barbed wire

that ran along the border with Austria and flagrantly, yet officially, allow East Germans

to cross over this border (contributing to a building crisis of legitimacy in East

Germanys continuation with Soviet-style socialism).

Similarly for Poland, the regimes distance to the Soviet Union was historically

significant in that, among the Central and Eastern European nations, it had remained the

least subsumed under Soviet domination with provisions not only for the Catholic Church

but also for an independent peasantry, who had largely retained their private holdings

(Lewis 1998). In the context of the model presented here, we are looking for implicit or

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explicit signals that either hard- or soft-liner elites may have made in order to

communicate to civil society not only the probability of the use of repressive force in the

event of misconstrued marginal political liberalization but also their commitment levels.

Distinctive to both Hungary and Poland, the confluence of economic and political events

in the 1980s provided reform-minded elites with a modicum of political autonomy and

opportunity to demonstrate their intentions. Failing economies and loosened political

environments converged to create a fissure among both Polish and Hungarian elites to

either proceed with ideologically rigid, within system responses to these crises or

initiate reform, however tentative of its outcome.

b. The Role of Civil Society:

Far from a public, meso-level sphere of freely associating groups, in the former

Soviet Union (FSU) groups and members of such types of organizations were subject to a

variety of disincentives. Can using the term civil society to delineate non-

institutionalized, politically active associations in pre-transition nations be theoretically

viable, or is it simply a charitable over-extension of the term? Given Diamonds

definition of civil society as the realm of organized intermediary groups that are

voluntary, self-generating, independent of the state and the family, and bound by a legal

order or set of shared rules (1997, xxx); it is possible to ascribe this term to the loosely

bound set of, although frequently illegal, groups that sought to oppose the regime.

Additionally, according to Schmitter, the mere presence of these organizations is

necessary evidence for the existence of a civil society, [but] it alone is not sufficient

proof (1997, 240). This is generous given his earlier proclamation that civil society

occurs only after, not before, the transition begins (ODonnell and Schmitter 1986).

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Others, however, have argued that the primary organizing principle behind civil

society is one seeking freedom of association and communication ((Linz and Stepan

1996: Table 1.1, 14). Even Schmitter places social groups and potential groups concerned

with interest articulation and providing pressure on legislative assemblies (via what he

calls the pressure regime) near the end of both the state-civil society and power resource

continuums, such that these groups represent intense, non-state pressure apparatus

(Schmitter 1997, see Figure 1, 245). Civil society in pre-transitional nations can simply

be a collection of organizations attempting to organize autonomous groups, movements,

and individuals to pressure the regime. Other scholars argue that for Central and Eastern

European countries, the notion of civil society was an us vs. them construction, such as

the us vs. the regime (Smolar 1997, 263; see also Linz and Stepan 1996, 270; Taras

1992).

Although, rather than a strict interpretation of us vs. them, it may have been the

initial alliances between the regime and oppositional groups that fostered the rise of civil

society (Linz and Stepan 1996, 304). As in Russia proper, groups in Central and Eastern

Europe responded to the 1975 Helsinki agreement as an impetus for organization around

which dissidents could bring outside attention to bear. The National-Accommodative

types (Poland and Hungary) were tolerant of low level dissident activity (Kitshelt et al

1999, 25) and these initial groups further served as precedents to pressure regimes in not

only tolerating their presence but also tolerating the gradual increase of new groups.

In Hungary, pre-transition civil society was buttressed by its goulash economy.

This illegal, yet implicitly tolerated market established networks of individuals and

groups that were neither monitored nor regulated. Although its primary function was one

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of satisfying economic needs, it became conduits for information and influence between

these same individuals and groups. For Hungarians, because of the only loosely inter-

related economic networks and non-totalitarian nature of the incumbent communist

regime (Kitschelt et al 1999), a formally defined and recognizable civil society was

mostly a collection of dispersed and less organized dissident groups (Fehr 1992).

Liberally organized political opposition served as a proxy for loosely grouped

organizations that remained for the most part uncongealed until 1987 (Linz and Stepan

1996, chapter 17). After which, the regimes willingness to engage opposition groups

provided a degree of legitimacy for these non-political groups. Their impact was

significant in the process of transition as the nascent civil society did succeed in acting, if

not in a monolithic, at least a unified manner by negotiating free elections and a delay of

the presidential election in order for Hungarians to assess the outcome of the

parliamentary elections (Linz and Stepan 1996, 311).v

Polands pre-transition civil society drew its markedly stronger coherence from

another source. Backed in part by the Catholic church, anti-regime movements were

moral movements against the imposed communist doctrine and ideology. Polish

dissidents such as Jacek Kuro and Adam Michnik emphasized civil societys ethical

opposition to continued Soviet-sponsored communist rule (Linz and Stepan 1996, chapter

16; Taras 1992). Further, pre-transition Polish civil society, driven by more than strictly

political concerns, forged a relationship between commonly disjointed groups of workers,

intellectuals, and students. Distinctive to Poland, this unity among disparate groups (one

hesitates to call it solidarity) has been acknowledged as its civil societys uniquely

powerful horizontal relationship with itself (Linz and Stepan 1996, 262).

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In both the 1970s and 1980s, the regimes hesitancy toward the purging of all

opposition and dissident groups was a source of constant irritation between the Soviet

and Polish political elites. Polands hegemonic member of a proto-civil society was the

labor organization, Solidarity; and although not alone in opposition,vi

as the herald for

political liberalization in that geo-political region during the 1980s, it benefited from the

Roman Catholic Churchs consistent support and international appeal.

Similar to the transitions of Chile and Brazil, Polands transition benefited from

the organizational and associational strength of its core members about the existing

networks of labor unions as the prototype of their civil society. With increasing frequency

and intensity through the 1980s, Poland was being subjected to coordinated, strikes of

workers, the intelligentsia, and students (backed by the illegal Solidarity) aimed at

voicing increasingly political popular demands. Linz and Stepan have argued that

Polands transition was a classic four-player game of transition ([including] regime

radicals, regime moderates, opposition moderates, opposition radicals) (1996, 265), by

May 1988, Polands transition could clearly be delineated into the actors that this model

specifies, requiring an ideologically split regime and a powerful, unified, and

oppositional civil society.

For our concerns here, after establishing the existence of a split among within-

regime elites and a civil society in both Hungary and Poland, we must address the latters

perceptions and beliefs about r (that is the probability of a successful repression) and z

(the probability that the liberalizer type is the least committed to reform). Again, if rand

z are high enough, the all types of elites play open (distinct from the separating

equilibrium and opening move of most committed elites: zone I and III in Figure 2) and

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will be met with civil society playing enter (rather than organize), ending the

opportunity for transition. As civil society wants Transition rather than Broader

Dictatorship, the biggest (and more tractable) concern for civil society is probably r

(although still considered in conjunction with z) and Zone I provides the certainty of a

separating equilibrium and the dominant strategy for all liberalizer types to play reform

in the final round.

For both Hungary and Poland, incumbent elite behavior in the late 1980s was

increasingly reform oriented (see above). However, civil societys beliefs about z were

relevant only if r

. Therefore, what were the regimes probabilities of successful

repression? Central to this was the possibility of Soviet military intervention and one

fraught with uncertainty. For members of the Polish and Hungarian civil societies, there

existed competing notions about the possible intervention by the Soviet military on behalf

of the incumbent regime. Recent history provided each country with precedents about the

use of Soviet military force to eliminate popular protests and calls for reform.vii

However,

this use of force was lowered given the new political paradigm of Gorbachevs

perestroika and glasnost, an international peering into the region, and a seemingly

lessened ideological commitment by elites in the national parliaments. Dissidents and

activists for reform remained skeptical of the use of Soviet military intervention as they

were concerned that hard-liners within the Kremlin would oust Gorbachev and return the

Soviet Union to a more totalitarian regime (Linz and Stepan 1996, 241). Similarly, yet

contradictorily, members of these oppositional groups reasoned that Soviet intervention

on behalf of the ancien regimes, albeit formidable, for the Soviets, was too costly given

the more endurable cost of tolerance.

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Elites in both countries seemed to be signaling their intentions such that the use of

repression was increasingly improbable, despite the value ofr, which itself had lessened

due to the late 1980s proliferation of Gorbachevs within-system change and refusal to

intercede in intra-national political contestation with Soviet military might.viii

These

regimes further demonstrated a willingness to negotiate entered into contestation over

institutional reform with members of civil society. This is significant to the strategic

interaction. Combined with both Poland and Hungarys civil societies beliefs about the

types of elites they were facing, the diminishing possibility of Soviet military

intervention (r) encouraged civil society to negotiate with an opening regime. Again, civil

societys choice of strategy pivots on their cautious assumptions about rand z. If the joint

probability is high enough, civil society does not organize, but Enters when liberalizers

open the regime. This Zone III is subject to the joint probability of both r and z, resulting

in a pooling equilibrium that forces civil society to respond to an Open move by

liberalizers with a risk-averse Enter. Despite the possibility that the liberalizer player

type is either less or more committed, civil society, based on its beliefs about r and z,

safely plays Enter.

For Poland, the leader of Solidarity (re-legalized in April 1989), Lech Walesa was

invited to the Round Table talks with the Communist Party, which not only resulted in a

power sharing arrangement for first parliamentary election but also eventually propelled

him to the Presidency. This process began in Poland and demonstrated to Hungary that it

was a possibility (Linz and Stepan 1996). The Hungarian regimes straddling of the

divide between political systems was resolved when members of the regime agreed to

meet with members of dissident organization at the regime-initiated Round Table talks.ix

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V. Conclusion:

The importance of civil society in this model is not its potential role in the

eventual consolidated democracies but that it offers a pivotal and, albeit it fleeting,

primary role. Smolar (1997, 268) states simply that [t]he existence of a civil society of

resistance was dependent upon the existence of a hostile state[and a]s soon as this state

disappeared, the civil society that opposed it also disintegrated. Following the transition

period, civil society, as a collection of interest associations that pressured the regime

evolved quickly into institutionalized participants (parties and interest groups). In some

cases, the regimes willingness to negotiate weakened the centripetal forces of civil

society immediately following the transition period. In this period, the fragmentation of

civil society into competing groups, whether interest groups, parties, or non-

institutionalized political associations is evident as consolidation forces civil society to

give way to a more narrowly defined political society (see Cohn and Arato 1992), as

without a common enemy there remains no raison detre for a unified civil society.

The role of uncertainty (on the part of a civil society about the intentions and

preferences of the liberalizer that opens the regime) in the transition game is evident. Not

only did both the government and the opposition overestimated the governments

strength leading the former to engage civil society and the latter to underestimate the

rapidity and totality of the collapse (Linz and Stepan 1996; see Przeworski 1991, 87), but

the beliefs about the possibility of intervention by the Soviet military (r) also encumbered

the process of engagement. Yet both Przeworskis model and our model with uncertainty

presented here do not attempt to explain all anti-authoritarian transitions as in some cases,

the basic assumptions are not met. Again, using game theory to analyze the strategic

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interaction of the competing groups of transition is an analytical tool that helps to clarify

the strategies and beliefs of the actors from which to construct explanations and

eventually predictions. Although Przeworskis model is not the only attempt in trying to

account for this complex and dynamic process, it does capture one important interaction

between substantively significant groups and their decisions that occur during the

transition process. Future prospects for this particular game include creating competing

groups within the larger unitary actors or introducing 3-person triadic competition (e.g.

regime, civil society and outside player games). As our theoretical knowledge increases

about the process of transitions, game theory may be called upon to examine structural

processes of transition that posit the inevitable structural conflicts of authoritarian

regimes that result in a breakdown.

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Tables and Figures:

Figure 1: Przeworskis Model of Political Liberalization:x

Liberalizers

Stay Open

SDIC Civil Society

Enter organize

BDIC Liberalizers

Repress reform

Nature

r 1 r

NDIC INSURRECTION TR

Figure 2: From Gates and Humes (128, 1997):

Nature

Liberalizers LiberalizersLiberalizers

Civil Society Civil Society Civil Society

Liberalizers Liberalizers Liberalizers

xy z

stay openstay

open stay open

enter organize enter organize enter organize

repress

reform

repress

reformrepress

reformNature Nature Nature

r 1-r r 1-r r 1-r

SDIC4, 2

SDIC3, 2

SDIC4, 2

BDIC5, 4

BDIC5, 4 BDIC

5, 4

NDIC2, 1

INSURRECTION1, 3

TRANSITION3, 5

NDIC2, 1

INSURRECTION1, 3

TRANSITION3, 5

NDIC2, 1

INSURRECTION1, 3

TRANSITION2, 5

Figure 3: The perfect Bayesian equilibria as functions of r and z:

33


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ProbabilitythatLiberalizeris

theleastcommitte

d

Probability of successful

repression

0 11/2

1

0

1/2

1/4

Zone I

Zone III

Zone II

3/4

1/3

1/4

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Table 1: Preferences of Players:

5 4 3 2 1

More

Committed

BDIC TRAN SDIC NDIC INSUR

LessCommitted

BDIC SDIC TRAN NDIC INSURLiberalizer

LeastCommitted

BDIC SDIC NDIC TRAN INSUR

Civil Society TRAN BDIC INSUR SDIC NDIC

Table 2: Perfect Bayesian Equilibria with three types of Liberalizers:

r z Less

CommittedLiberalizer

More


Least


Civil

Society

Civil Societys

Belief

[0,1]z stay, reform open,reform

stay, reform organize 1m = 1

2r

1

2

r [0,1]z stay, reform open,

reform

stay,

repress

organize 1m =

1

2r

1[2(1 )

zr

+

,1] open,reform

open,reform

open,repress

Enter , ,ls m lt x y z = = =

35


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iIn assessing the game theoretic parts of the book, we will be drawing primarily from

chapter 2, Transitions to Democracy (Democracy and the Market, 1991).ii

Although, di Palmas argument relies heavily on the negotiated transition between the

new elites and incumbent elites, rather than incorporating the participation of civil

society.iii Their ideal types include: Patrimonial communism relies on the charismatic, personal

relations of the leaders in the state and within the party. This is supported by extensive

patronage and clientelist networks.National-Accommodative Communism is moreformally developed formal-rational bureaucratic form of governance structures that

partially separates party rule and technical state administration.Bureaucratic-

Authoritarian Communism is in essence a formalized authoritarian, if not quasi-totalitarian, state (Kitschelt et al 1999, chapter 1).iv

Most explicit was Gorbachevs encouragement for experimenting with within system

solutions, his profound restructuring orperestroika.v

As the old regime was looking to preserve power with strong elected presidencies and

majoritarian forms of representation, many forfeited strict adherence to this for thepromise of early elections (Geddes 1996, 21-22).vi

Other dissident groups included KOR (1976), the Movement for the Defense of Humanand Civil Rights (1977), and the Flying Universities which retained the teaching of Polish

history and applied somewhat challenging Marxist critiques to really existing Polish

socialism (Taras 1992, 88).vii

For Hungary it was the popular uprising of October 1956. For Poland it was December

1981.viii

Although, Soviet action with both Polish and Hungarian history has been rifecontradictions between things said and actions taken.ix

The saying at the time was that transitions in Central and Eastern Europe took 10 yearsin Poland, 10 months in Hungary, 10 weeks in East Germany, 10 days in Czechoslovakia,

and 10 hours in Romania.x

SDIC is Status Quo Dictatorship, BDIC is Broadened Dictatorship, NDIC is NarrowerDictatorship, and ris the probability Liberalizers attach to successful repression.

Documents

Ahn, T.K.. and Loveless, Matthew - Game Theory and Democratic Transitions Modeling and Theoretic Re-Consideration of Przeworski's Democracy and the Market