This text discusses the subversion equilibrium at t = 1 in the model. In this case, the owner chooses subversion s = 1 at t = 2. The condition for zE\_SV from (23) becomes (29). This equation may have multiple solutions, and the owner will choose the lowest cutoff. An increase in A raises the left-hand side curve, which lowers the equilibrium zE\_SV in the lowest cutoff equilibrium.
Here are some questions and answers about the text:
- What is the subversion equilibrium at t = 1?
- What is the condition for zE\_SV from (23)?
- How does an increase in A affect the equilibrium zE\_SV?
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