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Baron Diermeier (2006) - Strategic Activism And Nonmarket Strategy (view source)
Revision as of 18:31, 28 February 2011
, 18:31, 28 February 2011→With a Single Target
Assume that the activist can commit not to conduct a campaign once a concession is made. Such a committment could be credible if the activist had a reputation.
The activist will not commit conduct a campaign if:
:<math>v(\hat{x}) \ge u(x_D^*, r^*, h^*)\,</math>, or <math>\hat(x)-x_0 \ge \frac{p}{2}(x_D^*-x_0)\,</math> in example
Likewise the target will adopt if:
:<math>\pi(\hat{x}) \ge \pi(x_0) - h^*\,</math>, or <math>\frac{h^*}{\eta} \ge \hat(x)-x_0\,</math> in example
Putting these together (noting that <math>\hat{x} < x_D^*\,</math>) <math>\hat{x}\,</math> exists in example iff:
:<math>\frac{2-p}{1-p} \ge \frac{\beta}{\alpha}\,</math>
Therefore if harm is emphasized over reward then pro-active measures can be observed. Note that if the activist can not commit then there is a hold up problem that prevents pro-active measures: After the firm had implemented <math>\hat{x}\,</math> the activist would consider it the new <math>x_0\,</math> and begin the cycle again. This is where a reputation may be necessary to provide the commitment.
====With Multiple Targets====
