Beyond The Grip of the Sovereign

Abstract

Nation states are increasingly losing the power to regulate markets and corporations to the effect that many regulatory guidelines and principles are now either being worked out by corporations themselves (so-called business-driven programmes) or agreed upon in more inclusive processes in which social and environmental interest groups are involved (so-called multi-stakeholder initiatives). This paper aims to analyse and model the complex ways in which these new norms and standards emerge, in particular when the partners at the negotiating table have conflicting interests. Unlike recent contributions that do not consider power imbalances we argue that diverging interests are a key characteristic of negotiations. We present a team game-theoretical framework in which players can switch between two kinds of reasoning: an individual mode in which stakeholders aim for the best possible outcome for themselves and a ‘we-mode’ in which they are genuinely concerned with finding a standard that is optimal for the whole group. We show that a higher inclination towards ‘we-mode’ reasoning is beneficial overall and maximises individual pay-offs as well as the outcome for the entire group. We argue that cooperation is therefore in the rational self-interest of the stakeholders, which backs up the argument in favour of honest deliberation at the negotiating table with references to rationality. Based on the results of our model we conclude that in a world where national regulatory frameworks are losing their grip, only norms and standards that have been worked out by a sufficiently large number of ‘we-reasoning’ stakeholders can be called legitimate.