The Dynamics of Instability
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.
Cite
@article{arxiv.2303.07285,
title = {The Dynamics of Instability},
author = {César Barilla and Duarte Gonçalves},
journal= {arXiv preprint arXiv:2303.07285},
year = {2023}
}