This paper presents a theory of the market for activism where citizens fund activists, campaigning activists pressure firms to change their practices, and firms self-regulate to forestall or mitigate campaigns. Activists have leverage because firms must self-regulate before they are targeted, and their self-regulation must deter the activists conditional on being targeted. Activists anticipate gaining more from campaigns against soft (more vulnerable) firms than hard (less vulnerable) firms, so it is more costly for soft firms to forestall the activists, and some risk a campaign but self-regulate to mitigate the probability that the campaign succeeds. Campaigns thus can occur in equilibrium. The threat from activism is the probability that a firm is targeted, and the stronger the threat the fewer campaigns there are because more firms self-regulate to forestall a campaign. Radical activists target harder firms than do moderate activists, and the more radical the activists the more costly it is to forestall them. Some firms are too hard to be threatened by activism and maximize their profits. Firms that are too hard to target directly may be vulnerable to campaigns threatening their supply and distribution chains. Activists and their donors have an incentive to maximize the scope of activism; that is, the breadth of the threat from activism.
