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Regulation And Opportunism: How Much Activism Do We Need?

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Author Info

  • Aleix Calveras

    ()

  • Juan-José Ganuza

    ()

  • Gerard Llobet

    ()
    (CEMFI, Centro de Estudios Monetarios y Financieros)

Abstract

This paperanalyzes the current trend towards firms' self-regulation as opposed to the formal regulation of a negative externality. Firms respond to increasing activism in the market (conscious consumers that take into account the external effects of their purchase) by providing more socially responsible goods. However, because regualtion is the outcome of a political process, an increase in activism might imply and inefficiently higher externality level. This may happen when a majority of non-activist consumers collectively free-ride on conscious consumers. By determining a softer than optimal regulation, they benefit from the behavior of firms, yet they have access to cheaper (although less efficient) goods.

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Bibliographic Info

Paper provided by CEMFI in its series Working Papers with number wp2005_0508.

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Date of creation: Oct 2005
Date of revision:
Handle: RePEc:cmf:wpaper:wp2005_0508

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Keywords: Activism; corporate social responsability; voting and regulation.;

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References

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Citations

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Cited by:
  1. Juan-José Ganuza & Gerard Llobet & Beatriz Domínguez, 2009. "R& D in the Pharmaceutical Industry: A World of Small Innovations," Management Science, INFORMS, vol. 55(4), pages 539-551, April.
  2. Ceron, Jose A. & Suarez, Javier, 2006. "Hot and Cold Housing Markets: International Evidence," CEPR Discussion Papers 5411, C.E.P.R. Discussion Papers.
  3. Aleix Calveras & Juan-José Ganuza & Gerard Llobet, 2005. "Regulation And Opportunism: How Much Activism Do We Need?," Working Papers wp2005_0508, CEMFI.
  4. Javier Diaz-Gimenez & Josep Pijoan-Mas, 2006. "Flat Tax Reforms in the U.S.: a Boon for the Income Poor," Computing in Economics and Finance 2006 400, Society for Computational Economics.

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