Economics and Politics, Forthcoming
31 Pages Posted: 13 Oct 2015 Last revised: 3 Jun 2016
Date Written: February 20, 2016
We examine whether ruthless members of society are more likely to revolt against an existing government. The decision of whether to participate can be analyzed in the same way as the decision to exercise an option. We consider this decision when there are two groups in society: the ruthless and average citizens. We assume that the ruthless differ from the average citizens because they invest in fighting technology and therefore face a lower cost of participation. The participation decision then captures two important (and conflicting) incentives. The first is that, since participation is costly, there is value in waiting to participate. The second is that there is value in being the first-mover and capturing a greater share of the "spoils of war" if the revolution is successful. Our model generates the following implications. First, since participation is costly, there is some positive threshold for the net benefit. Second, if the ruthless do not have a significant cost advantage, then one cannot predict, a priori, that the ruthless lead the revolt. Third, when the ruthless have a significant cost advantage, they have a lower threshold and always enter the conflict first. Finally, existing regimes can delay revolution among one or both groups by increasing the cost of participation.
Keywords: revolution, option games
JEL Classification: D74
Suggested Citation: Suggested Citation
Hendrickson, Joshua R. and Salter, Alexander William, A Theory of Why the Ruthless Revolt (February 20, 2016). Economics and Politics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2673304 or http://dx.doi.org/10.2139/ssrn.2673304