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Strategic Activism in an Uncertain World

Author

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  • van der Made Allard

    (IEEF, Rijksuniversiteit Groningen Faculteit Economie en Bedrijfskunde, Nettelbosje 2, Groningen9747AE, Netherlands)

Abstract

We model private politics in the presence of two-sided incomplete information. An interest group (IG) threatens to inform consumers about a firm’s damaging technology should the firm not adopt a clean technology. The IG does not know how costly adopting the clean technology is and the firm does not know how much the IG cares about the damages. In equilibrium an IG who cares a lot signals its type to the firm and the firm is more inclined to adopt the clean technology if it receives such a signal. However, impasses can occur: the firm does not adopt the clean technology despite the fact that the IG has signaled that it cares a lot and threatens to inform a large fraction of the consumer population. The IG never informs all consumers: as soon as a certain fraction of the consumers is informed by the IG the firm reduces its price and thereby reveals to the remaining consumers that it is employing a damaging technology. The IG’s actions increase consumer well-being, but decrease total welfare unless the cost of adopting the clean technology is likely to be low. Yet, since the IG is inclined to target firms with this property, a regulator might want to delegate information provision to the IG.

Suggested Citation

  • van der Made Allard, 2020. "Strategic Activism in an Uncertain World," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(1), pages 1-13, January.
    • Handle: RePEc:bpj:bejtec:v:20:y:2020:i:1:p:13:n:6
    DOI: 10.1515/bejte-2018-0103
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    More about this item

    Keywords

    asymmetric information; impasses; interest groups; private politics; technology adoption;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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