The seminal work for the study of rationalist regime theory is Robert Keohane’s
After Hegemony (1984). The book explains the continued existence and
increasing strength of international institutions in the wake of declining
American hegemony. Drawing on rational choice logic and microeconomic
theories, Keohane offers a functional theory of international regimes - in other
words, the anticipated benefits to states explain the persistence of the regime
and compliance with its rules. ‘Political market failure’ is a central notion in
Keohane’s analysis: ‘Like imperfect markets, world politics is characterized by
institutional deficiencies that inhibit mutually advantageous cooperation’
(1984, p. 85). While bargaining could in principle correct these failures (Coase,
1960), Keohane argues that the underlying conditions for Coasean logic to
operate - well-defined property rights (that is, a legal framework), perfect
information, and zero transactions costs - do not naturally exist in the
international system. Regimes, then, serve to fill in these gaps to facilitate
cooperation among states on a decentralized basis