Theory of regional stability as a public good: Examples from Southern Africa

The article examines the interaction of countries in the same region when making efforts to achieve stability. The leader in regional initiatives that foster stability is likely to be the most vulnerable member of the region because in the event of regional instability, the leader member will experience the most detrimental effects. The analysis identifies a key factor — cost comparison — that determines counter-regional instability cost allocations. It is shown that market failures associated with crisis prevention and solving regional instability may be jointly reduced by a vulnerable member. Nevertheless, the subgame perfect equilibrium will still be suboptimal due to leaders who do not internalize the full externalities. Because of the high costs associated with a leader member, she is likely to be the first mover in the game of providing stability, the regional public good, giving its neighbors the opportunity to free-ride.