Why differentiated integration is such a common practice in Europe: A rational explanation

With Brexit imminent, the debate on the need for differentiated integration (DI) by means of opting-out has gained new momentum. At the same time, non-member states decide to adopt European Union (EU) rules as exemplified by the European Neighbourhood Policy. In light of these opposing observations, we examine the EU’s disposition to supply DI. We outline the strategic interactions of the EU member states or non-members in the context of two forms of DI: opting-out and inducing-in. In the case of opting-out, EU member states can refrain from adopting EU rules; inducing-in refers to providing non-member states with incentives to adopt EU rules. We show that the information asymmetries inherent to the strategic interactions result in a situation in which the EU is likely to supply opportunities to opt-out for member states to a much greater extent than necessary. Furthermore, the EU is likely to offer more compensation to non-member states in exchange for adopting EU rules than it would actually need to.