Barilla, César;
Gonçalves, Duarte;
(2024)
The dynamics of instability.
Theoretical Economics
, 19
(1)
pp. 365-405.
10.3982/te5295.
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Abstract
We study a model in which two players with opposing interests try to alter a status quo through instability-generating actions. We show that instability can be used to secure longer-term durable changes, even if it is costly to generate and does not generate short-term gains. In equilibrium, instability generated by a player decreases when the status quo favors them more. Equilibrium always exhibits a region of stable states in which the status quo persists. As players' threat power increases, this region shrinks, ultimately collapsing to a single stable state that is supported via a deterrence mechanism. There is long-run path-dependency and inequity: although instability eventually leads to a stable state, it typically selects the least favorable one for the initially disadvantaged player.
| Type: | Article |
|---|---|
| Title: | The dynamics of instability |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.3982/te5295 |
| Publisher version: | http://dx.doi.org/10.3982/te5295 |
| Language: | English |
| Additional information: | Copyright © 2024 The Authors. Licensed under the Creative Commons Attribution-NonCommercial License 4.0, https://creativecommons.org/licenses/by-nc/4.0/legalcode. |
| Keywords: | Instability, social conflict, stochastic games JEL classification: C72, C73, C78, D74 |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10195878 |
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