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Regime theory is a theory within international relations derived from the liberal tradition that argues that international institutions or regimes affect the behavior of states (or other international actors). It assumes that cooperation is possible in the anarchic system of states, as regimes are by definition instances of international cooperation.
Theoretical foundations 
While realism predicts that conflict should be the norm in international relations, regime theorists say that there is cooperation despite anarchy. Often they cite cooperation in trade, human rights and collective security among other issues. These instances of cooperation are regimes. The most commonly cited definition of regimes comes from Stephen Krasner. Krasner defines regimes as "institutions possessing norms, decision rules, and procedures which facilitate a convergence of expectations."(see Krasner 1983).
Not all approaches to regime theory, however are liberal or neoliberal; some realist scholars like Joseph Grieco have developed hybrid theories which take a realist based approach to this fundamentally liberal theory. (Realists don't say cooperation never happens, just that it's not the norm; it's a difference of degree).
Regime theory in international political economy (IPE) 
As stated above, a regime is defined by Stephen D. Krasner as a set of explicit or implicit "principles, norms, rules, and decision making procedures around which actor expectations converge in a given issue-area.” This definition is intentionally broad, and covers human interaction ranging from formal organizations (i.e., OPEC) to informal groups (i.e., major banks during the debt crisis). Note that a regime need not be composed of states.
Within IPE there are three main approaches to regime theory: the dominant, liberal-derived interest-based approach; the realist critique of interest-based approaches, and finally knowledge-based approaches that come from the cognitivist school of thought (Hasenclever, 1997). The first two are rationalist approaches while the third is sociological.
Although realism is arguably the dominant school of thought in the field of international relations generally, within regime theory specifically, because regime theory is by definition a theory that explains international cooperation (i.e. it's a traditionally liberal concept) liberal approaches prevail within the literature.
Liberal approaches to regime theory in IPE 
Liberal interest-based approaches to regime theory state that cooperation in anarchy is possible without a hegemon because there exists a "convergence of expectations." Regimes facilitate cooperation by establishing standards of behavior which signal to all other members that individual states are in fact cooperating. When all states expect the other participants to cooperate, the probability of sustaining cooperation increases dramatically.
Neoliberals believe that realists neglect the degree to which countries share interests and the iterative nature of state relations. Realists err by implicitly modeling the world using the classic single-play prisoner's dilemma, in which the payoff structure makes defection a dominant strategy for both players. The difference between this model and reality is that states are not like prisoners, states must continually cooperate whereas prisoners will never see one another again. One's decisions today, then, have future consequences. Mutual cooperation is thus rational: the sum of relatively small cooperative payoffs over time can be greater than the gain from a single attempt to exploit your opponent followed by an endless series of mutual defections. (Robert Axelrod, 1984) referred to single-shot exploitation as the behaviour whereby states avoided "Tit for Tat."
In the iterated Prisoner's Dilemma, the actors' behavior is determined by the following assumptions:
1. States are rational, unitary, gain maximizing actors, living in anarchy and ridden by the security dilemma.
2. There are future consequences for present actions. The prisoner's dilemma is not a one-shot event. Thus;
3. It is in the interest of states to cooperate in the present because, in the future, other states will defect on them (Tit-for-Tat strategy). Thus;
4. The theory presupposes that states are concerned with absolute gains, that is, states do not consider the gains or losses of other states in their utility analysis. In contrast neorealists argue that states are concerned with relative gains. That is, states are concerned with the advantages they gain versus the advantages of other states in the anarchic system.
Probably the most famous neoliberal IR theorist Robert Keohane argues that international regimes can increase probability of cooperation by:
A. Providing information about the behavior of others by monitoring the behavior of members and reporting on compliance.
- Regimes clearly define what constitutes a defection and often clearly prescribe punishments for defection.
- This reduces the fear that the state is being exploited by other members of the regime and minimizes the chance for misunderstanding. Prescribing sanctions reduces the incentive to covertly defect.
B. Reducing transaction costs.
- By institutionalizing cooperation, regimes can reduce the cost of future agreements. By reducing the cost of reaching an agreement, regimes increase the likelihood of future cooperation. For example, each round of GATT resolved many procedural problems that did not have to be revisited in subsequent rounds, making cooperation easier and more likely.
C. Generating the expectation of cooperation among members.
- By creating iteration and the belief that interaction will continue for the foreseeable future, regimes increase the importance of reputation and allow for the employment of complex strategies.
Other authors also claim that regimes can provide incentives to cooperate and deterrents to defect by altering the pay-off structure of the regime (Kenneth A. Oye 1986).
Realist approaches to regime theory 
Realists such as Joseph Grieco propose power-based theories of regimes based on hegemonic stability theory. Regime theory may appear to counter hegemonic stability theory sometimes, but realists also apply it within regime theory in order to explain change. When used in this way, realists conclude that a strong hegemon is what makes for a successful—i.e., robust, resilient—regime.
In brief, within regime theory, liberals and realists disagree on two things: the nature of international cooperation and the role of international institutions. Liberals believe that international institutions bring about an environment conducive to the convergence of state interests, which facilitates regime cooperation. On the other hand, realists believe that regimes merely reflect the distribution of power in the international system. (Powerful states create regimes to serve their security and economic interests; regimes have no independent power over states, especially great powers; as such, regimes are simply intervening variables between power, the real independent variable, and cooperation, the dependent variable). For example, realist Susan Strange argues that institutions such as the World Bank, General Agreement on Tariffs and Trade, International Monetary Fund, and other organizations established after World War II are only tools of American grand strategy.
Cognitivist knowledge-based approaches to regime theory in IPE 
In contrast to the rationalist approaches above, cognitivists critique the rationalist theories on the grounds that liberals and realists both use flawed assumptions such as that nation-states are always and forever rational actors; that interests remain static, that different interpretations of interests and power are not possible. The cognitivists also argue that even when the rationalist theories employ iterated game theories where future consequences affect present decisions, they ignore a major implication of such iteration: learning. Consequences from an iterated game look backwards to the past as well as forward to the future. So one’s decisions today are not the same as one’s decisions tomorrow, not only because the actors is taking the future into account but because one is taking the past into account as well. Finally cognitivists use a post-positivist methodology which does not believe that social institutions or actors can be separated out of their surrounding socio-political context for analytical purposes. The cognitivist approach then, is sociological or post-positivist instead of rationalist. In sum, for the cognitivists, it’s not only interests or power that matters but perceptions and environment as well.
See also 
- International regime
- International relations
- International relations theory
- International legal theory
- Neorealism (international relations)
- Neoliberalism in international relations
- International political economy
- Hegemonic stability theory
- Axelrod, Robert. 1984. The Evolution of Cooperation. New York: Basic Books.
- Hasenclever, Andreas, Peter Mayer, and Volker Rittberger. 1997. Theories of International Regimes. New York: Cambridge University Press.
- Krasner, Stephen D. 1982. “Structural Causes and Regime Consequences: Regimes as Intervening Variables." International Organization 36/2 (Spring). Reprinted in Stephen D. Krasner, ed., International Regimes, Ithaca, NY: Cornell University Press, 1983.
- Oye, Kenneth A. 1986. "Explaining Cooperation Under Anarchy: Hypotheses and Strategies.” In Kenneth A. Oye (ed) Cooperation Under Anarchy. Princeton, NJ: Princeton University Press. p. 1-24.
Additional readings 
- Snidal, Duncan. 1986. "The Game Theory of International Politics.” In Kenneth A. Oye (ed) Cooperation Under Anarchy. Princeton, NJ: Princeton University Press. p. 25-57.
- Krasner, Stephen D. (ed). 1983. International Regimes. Ithaca, NY: Cornell University Press.
- Matthews, John C. 1996. “Current gains and Future Outcomes: When Cumulative Relative Gains Matter.” International Security 21,1(Summer),112-146.
- Liberman, Peter. 1996. “Trading With the Enemy: Security and Relative Economic Gains.” International Security 21,1(Summer),147-165.
- Mearsheimer, John. 1994/5. "The False Promise of International Institutions. International Security 19/3 (Winter): 5-49.
- Keohane, Robert O. and Lisa L. Martin. 1995. "The Promise of Institutionalist Theory." International Security 20/1(Summer):39-51.
- Breitmeier, Helmut, Oran R. Young, and Michael Zurn. 2007. Analyzing International Environmental Regimes. Cambridge, MA: The MIT Press.