Game Theory in Canadian Politics
1) Harper refused to compromise, opposition votes non-confidence -> ELECTION
2) Harper refuses to compromise, opposition rolls over -> NO ELECTION
3) Harper compromises, opposition votes non-confidence -> ELECTION
4) Harper compromises, opposition lets government survive -> NO ELECTION
5) Wild card (i.e. prorogation, Harper pulls the plug himself, etc...)
At this point, I just can't see option 2 coming to pass, as Ignatieff would look worse than Dion ever did and would be ridiculed by the press all summer long. I think rolling over was a very legitimate option today, but after issuing a new set of demands, it's just not in the cards. I suppose there remains a small chance the NDP or Bloc might keep Harper afloat, but they've been fairly definitive in saying they'll vote against him at every opportunity.
So, with that in mind, the ball is in Stephen Harper's court - what are his options?
Well, if he wants an election, he has three ways to go about it (1, 3, 5). Presumably, he'd want to shift the election blame on to the Liberals, which might lead us to scenario 3, where Harper agrees to some of Ignatieff's rather ambiguous demands, but not enough to earn their confidence. Or, he could sneer at the opposition and simply dare them to bring his government down, trying to look like a strong, confident leader (option 1).
Now, if Harper doesn't want an election, he has the opportunity to avoid it. Ignatieff's demands really aren't that onerous (a plan here, a promise there...), and Harper doesn't even have to cave to Ignatieff - there are two other opposition leaders out there who might relish the opportunity of getting some "results for people"/"results for Quebecers". And, quite frankly, when the deficit is over 50 billion dollars, is anyone really going to care much if Jack Layton gets a few billion for a pet project of his?
So, the decision is Harper's. And, truth be told, I have no friggin' clue what he'll decide.