Competition for investment using investment incentives is a genuine strategic interaction, not a figment of policymakers’ imagination. Whether analyzed with Prisoners’ Dilemma or more complex games, the studies have found that optimal regulation of incentives improves overall efficiency and welfare. The European Union has shown what the broad parameters of ‘optimal’ regulation look like: banning investment incentives in rich regions, and holding them as low as possible in poorer regions. With rules that explicitly address incentives (rather than all subsidies) in place since 1997, the EU has managed to effect a reduction in the size of location subsidy packages, as we saw in Chapter 6.