Game Theory in the Venezuelan Crisis: The Challenge of Credible Bargaining

Venezuelan President Nicolas Maduro speaks at Miraflores Palace in Caracas, Venezuela December 12, 2018. Photo Credit: Reuters.

By: Felipe Herrera, Columnist

On 10 January, 2019, the Venezuelan National Assembly invoked Article 233 of the Constitution of Venezuela. Arguing that the “de facto dictatorship” meant there was no democratic leader, the Assembly declared that President Maduro had effectively abandoned his position.^[i] Soon thereafter, the United States recognized Juan Guaidó as the de jure president of Venezuela,^[ii] and the list of states recognizing Guaidó has grown to include over 50 others.^[iii] Threats of invasion abound, and most nations thus far have rejected the prospect of a military operation to resolve the crisis, although the Venezuelan opposition is dissatisfied with the efficacy of sanctions alone. I argue that the United States should clearly define its strategy or risk being addled by an incoherent and ineffective approach. A game theoretic analysis of the crisis can illuminate the pitfalls of threatening the military option.

Despite threatening notepads implying the United States was sending 5,000 troops to Colombia^[iv] and heavy-handed claims that Maduro’s days are numbered,^[v] Secretary of State Mike Pompeo has continued to reiterate his confidence that the Venezuelan people will resolve the crisis themselves. And contrary to expectations that Vice President Mike Pence was set to announce “concrete steps” to resolve the crisis^[vi] shortly before the February 25 meeting of the Lima Group in Colombia, Peru’s Assistant Foreign Minister ruled out the use of force as “unacceptable… [and] not a solution for what’s happening in Venezuela.”^[vii] This meeting ultimately left the Venezuelan opposition highly dissatisfied, as the Lima Group condemned Maduro and announced they would seek to take him before the International Criminal Court. However, they declined to impose new sanctions or take any clear action to resolve the crisis. Even so, the U.S. Treasury Department introduced new sanctions and pledged additional aid to nations receiving Venezuelan migrants,^[viii] while Vice President Mike Pence reassured Guaidó that force remained an option for the United States.^[ix]

Continued use of hostile rhetoric, though certainly effective at riling up domestic passions, blurs the picture for all actors involved. The study of game theory in international relations was pioneered by Thomas Schelling. His theories on bargaining and strategic behavior maintain that violent conflict is a result of bargaining failure due to asymmetric or incomplete information and unsuccessful signaling that fails to establish credible commitments.^[x] According to Schelling, the object is not to defeat your opponent in every interaction, but to seize all possible opportunities to cooperate. To do otherwise would be to risk violence.^[xi] This cooperation is made possible by effective bargaining, done through costly signaling that clearly expresses intent, capabilities, and outcome preferences. The continuous-action space is the total range of outcomes in an interaction, and the bargaining space is the overlap between the preferences of both actors involved. Only in “pure conflict… [such as] wars of complete extermination” is there no overlap where a satisfactory bargain can be made.^[xii]

So far, the Venezuelan crisis has exemplified the hawk-dove game, also known as ‘chicken,’ a classic 2×2 game theory model. Both actors aim to force the other to yield to them while trying to avoid the worst outcome, like two cars driving from opposite directions on a single lane refusing to back down but hoping to avoid a collision. Presumably, a military intervention would be the worst outcome for both the United States and Venezuela; in terms of loss of life for Venezuela and public perception/influence costs for the U.S. assuming the intervention goes the route of the Iraqi, Libyan, or Syrian cases. Avoiding this outcome requires one actor to yield to the other, and both sides signal their resolve to the other hoping to demonstrate that they are actually crazy enough to keep going and risk a collision.

In this regard, what gives Maduro an edge in terms of credibility to commit to his strategy is the personally existential nature of the crisis, considering the domestic hypersensitivity of authoritarians to both material and perceived losses. Counterintuitively, dictators can be acutely sensitive and accountable to constituencies, though not popular audiences. Unlike in democracies, the cost of deposition is not a career change but very often exile or execution.^[xiii] In the case of Venezuela, the constituency President Maduro is held accountable to is the military. The decisions resulting in his deposition are considered existentially whereas the interaction is not nearly as critical for President Trump. Conversely, the relatively low stakes for Trump personally compared to Maduro mean that failure to yield is not necessarily perceived like a head-on collision in a game of chicken. Refusing to yield and escalating the crisis would draw condemnation from the international community, long before an existential disaster. This flexibility in decision making, however, comes with its own drawbacks as it can seem at times like there is no cogent strategy undergirding the policy options that President Trump explores. After all, clear and consistent signaling is vital to successful bargaining.

The first iteration of the hawk-dove game involved Maduro’s decision to order American diplomats to leave the country after the United States recognized Guaidó. The U.S. then refused to evacuate nonessential diplomatic staff in the embassy in Caracas. As the deadline set by Maduro passed, the United States effectively called his bluff while misunderstanding his strategy. All Maduro needs to do to maintain power is sit and wait for the crisis to pass. To act too brazenly would needlessly provoke his military loyalists to reconsider their position. Learning from this, the Venezuelan opposition and its international allies hoped forcing humanitarian aid into the country on February 23 would trigger the collapse of his regime,^[xiv] inducing a second iteration of the hawk-dove game. Although Maduro’s violent response to the pushing of this aid drew about 160 rank-and-file military desertions,^[xv] his military leaders remain loyal, because the rhetoric in the United States has given Maduro the best get-out-of-jail-free card he could have hoped for: a narrative of regime change under the guise of humanitarian aid.

Continued threats of military invasion will have the unintended effect of generating a “rally-around-the-flag” effect within the Venezuelan military. Although time and again the United States’ allies denounce the military option, continued hostile rhetoric within the U.S. undermines meaningful diplomacy and President Trump should follow the regional consensus and delimit America’s strategy to seek a negotiated settlement. While a U.S.-led military intervention would almost certainly succeed in deposing Maduro, the United States should learn from its marked history of regime change, and seek to seize all opportunities for cooperation short of violence.