Great article! Must read.
It triggered some reflections on the game theory behind 🇪🇺European integration.
Beyond the specific topic of the North Sea Power Plant, the article highlights what is, in many sectors, a recurring pattern in the EU: a coordination game that would be beneficial, potentially allowing lower costs, greater security, and higher payoffs overall, but that struggles to materialize because of governance issues.
In other words, there is a lack of the institutions, rules, or even informal compromises that make the necessary trade-offs and their respective gains visible, acceptable, and achievable for all parties involved.
This is highly instructive and one of the pillars of game theory applied to European integration.
To better understand how it works, consider a textbook example: the adoption of the telephone at the beginning of the XX century.
In a city where nobody yet owns a telephone, each citizen reasons as follows:
">Buying a telephone costs money, installing it takes time, and learning how to use it is a hassle.
>If I'm the only one who has one, it is practically useless.
>Therefore, I refuse to adopt."
From an individual perspective, the decision is rational. Yet there is an alternative equilibrium: everyone buys a telephone. At that point, everyone can communicate rapidly, the value for each individual far exceeds the initial cost, and so on.
In practice, this second equilibrium produces a higher payoff for everyone.
The problem is that players clearly see the immediate cost ("I have to spend money and time"), while they struggle to perceive the emerging collective benefit ("I will gain access to a network of thousands of people").
In game theoretic terms, they are stuck in an inferior equilibrium because the payoff of the coordination game depends on the simultaneous choices of others.
Now let us introduce a new element: a telephone company that installs telephones free of charge for the first 10,000 users and publicly demonstrates a functioning network (or a software company that operates at a loss for years to spread adoption of its product, the standard Silicon Valley strategy).
This radically changes the perception of the game. Previously, the citizen saw a certain cost today and an uncertain benefit tomorrow. Now they see almost no cost today and concrete proof that others are joining.
[NB: The company has not changed the final payoff of the coordination game; it has changed the players' ability to see and believe in the high-payoff equilibrium.]
In many historical cases, the role of institutions, entrepreneurs, platforms, or political leaders is precisely this: making visible a coordinated equilibrium that already existed in theory but that players could not imagine as realistically attainable.
Of course, we see the same dynamic in the construction of EU integration, so much so that one could view the entire process of European integration as a single coordination game of historical proportions.
But take the Single Market: each state clearly sees what it must concede: trade openness, common standards, limitations on certain national policies. These are immediately observable costs.
Much harder to visualize is the emerging payoff of a market of hundreds of millions of people, with integrated value chains, greater investment, and stronger global bargaining power.
For this reason, political debate often focuses on the sacrifices required by coordination rather than on the surplus generated by the coordinated equilibrium, across all sectors, from the common currency to the construction of a power plant in the North Sea.
As
@POTFES notes, the element that can unlock the game is the presence of one or more mechanisms that make the future payoff credible and tangible: common institutions, pilot projects, guarantees, compensation mechanisms that facilitate compromise, concrete examples of success, etc.
Coordination games, and this is particularly clear in Europe, do not fail because the cooperative payoff is too low, but because the cooperative payoff is too distant, abstract, or uncertain relative to the immediately visible costs that the compromises of cooperation require.
Uncertainty about the detailed distribution of future costs and gains is the hidden cost that slows integration and pushes states to focus on short-term equilibria.
The most efficient and effective form of institutional innovation often consists of making the future sufficiently visible to coordinate expectations in the present, not by forcing outcomes that would not otherwise emerge, but by building the mechanisms that allow their full realization.