Multiethnic nations (South Africa, Russia, Nigeria, Rwanda, the former Yugoslavia, to name a few) have sometimes found decentralized political arrangements attractive. Such arrangements – as long as they last – permit peoples who may differ greatly in their conceptions of a good public life to develop and maintain their own separate communities, within the context of a larger and more powerful political economy. Ethnically more homogeneous nations such as the United States, at the time of its founding, or Australia today, often find decentralized modes of policy formation and administration convenient as well. In such nations, geographic distances, diverse economies, regional disparities in preferences, and variations in local historical experience can make decentralized policy-making institutions more efficient and more responsive than national ones.

The advantages of decentralization are realizable, however, only if there are good reasons for the players – ordinary citizens as well as regional and central governments – to believe that others will generally abide by the terms of the federation. That is, all must believe that the regional governments will not try to take advantage of one another and that the center will not try to usurp power from the regions. Without such assurance, frequent disputes and suspicion of foul play would reduce the participants' enthusiasm for the federation, possibly motivating some participating governments to withdraw from the federation altogether. Decentralized political institutions must somehow induce participants to believe that all others will abide by the federation's terms and to act accordingly, by complying as well.