This study argues for a behavioral interpretation of rational choice in a changing environment that potentially restores the equilibria of discounted repeated games as useful descriptors of long-term bilateral relations between nation-states. The analysis reveals that all subgame perfect...

The authors develop a characterization of subgame perfect equilibrium strategies in discounted repeated games that highlights a class of strategies called countervailing. When using countervailing strategies, the players focus on manipulating the other side's payoff to induce his cooperation....