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Abstract

It has been observed that industries self-regulate to placate a regulator from taking action, and revolutionary vanguards sometimes provoke an apathetic populace into revolt. This paper presents a very simple model that captures this strategic maneuvering, and applies it to several other examples. Two players have preferences over the realization of a policy; the first player has a marginal cost to affect the policy and the second player has a fixed cost. The fixed cost provides strategic incentives for the first mover to placate or provoke the second player. In equilibrium, the second mover may benefit from having preferences that diverge more from the first mover, and may benefit by having higher fixed costs. As the number of first movers increases, placation and provocation both become more likely, and the second player’s incentives to occlude or reveal its fixed cost become stronger as well.

Keywords

Fixed costs provision point revolution self-regulation

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Placation and provocation

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