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Baron Diermeier (2006) - Strategic Activism And Nonmarket Strategy (view source)
Revision as of 18:33, 28 February 2011
, 18:33, 28 February 2011→With Multiple Targets
If there are no strategic interactions between the firms then a firm has an incentive to adopt a pro-active measure to shift the activist's focus elsewhere. Thus there is a multiplier effect - the activist need only target one firm to make the entire industry shift pro-actively. However, without strategic interactions the shift is identical to that in single firm example above.
With strategic interactions, a competition in pro-active measures ensues. The result is equivalent to the activist conducting a second-price auction for the opportunity to avoid a campaign. A sufficient condition (but not necessary) for this is that harm is emphasized over rewards. The race to the top leads to greater aggregate change than targeting a single firm. This is the case regardless of commitment.
===Target Reputation===
