Strategic Cooperation and Contract Design in Collaborative Governance: Lessons From Game Theory

Collaborative governance has become an essential strategy for addressing complex public challenges, yet its success often hinges on fostering cooperation among diverse stakeholders. This study applies the Stag Hunt framework from game theory to analyze the failure of Indiana's welfare modernization project, a high-profile example of contractual and governance breakdown. The case highlights critical lessons: the importance of trust, shared purpose, and well-structured contracts in sustaining cooperation; the risks posed by misaligned interests and rigid contractual mechanisms; and the challenges of managing multipartner collaborations. By bridging theoretical insights with practical applications, this research offers actionable strategies to design contracts that mitigate risks and enhance cooperation in collaborative governance arrangements.