A Statistical Model of Bilateral Cooperation

In most situations of bilateral cooperation we can observe onlywhether or not potential partners actually cooperate. Yet weoften want to know what factors lead the actors to enter intoand continue cooperation. The model we develop—a dynamicversion of bivariate probit with partial observability—permitsone to estimate the probabilities that either of two partieswould want to cooperate and to identify the factors that affectthese probabilities. As an illustration, we focus on agreementsbetween national governments and the International MonetaryFund. The model should have a wide applicability.