While the molecular mechanisms underlying lysogeny and induction in bacteriophage have been intensely studied, relatively little has been done to relate these findings to their presumed selective functions. To explore the ecological basis for these traits, I have used a resource-based model for competition between bacteriophage with different probabilities of lysogeny and different spontaneous induction rates. In any given habitat the fitness of a phage will depend on the inputs of sensitive cells and nutrient resources. In equable environments (modeled here using chemostats with constant inputs of nutrients and sensitive cells), bacteriophage with low probabilities of lysogeny and low induction rates can always invade when rare and will generally be good competitors. In variable environments (chemostats with seasonal inputs), bacteriophage with higher probabilities of lysogeny and higher induction rates are favored. In both equable and variable environments, the ability of a phage to invade when rare will depend on the properties of the resident phage, and it is possible for phages with divergent parameter values to coexist. The modeling suggests that bacteriophage that have evolved moderately low induction and lysogeny rates will be able to "hedge their bets" against environmental change without sacrificing the ability to compete well in a constant environment. Implications of this theory for understanding the molecular basis of gene regulation in temperate bacteriophage and other viruses are discussed.