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Regulation And Opportunism: How Much Activism Do We Need?

  • Aleix Calveras

    ()

  • Juan-José Ganuza

    ()

  • Gerard Llobet

    ()

    (CEMFI, Centro de Estudios Monetarios y Financieros)

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

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Date of creation: Oct 2005
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Handle: RePEc:cmf:wpaper:wp2005_0508
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  1. Kahn, Matthew E & Matsusaka, John G, 1997. "Demand for Environmental Goods: Evidence from Voting Patterns on California Initiatives," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 137-73, April.
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  5. Aleix Calveras & Juan-José Ganuza & Gerard Llobet, 2005. "Regulation And Opportunism: How Much Activism Do We Need?," Working Papers wp2005_0508, CEMFI.
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  7. Marshall, David A. & Prescott, Edward Simpson, 2006. "State-contingent bank regulation with unobserved actions and unobserved characteristics," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 2015-2049, November.
  8. Gerard Llobet & Javier Suarez, 2005. "Financing And The Protection Of Innovators," Working Papers wp2005_0502, CEMFI.
  9. Repullo, Rafael, 2004. "Policies for Banking Crises: A Theoretical Framework," CEPR Discussion Papers 4727, C.E.P.R. Discussion Papers.
  10. Javier Suarez & Andres Almazan & Sheridan Titman, 2004. "Stakeholders, Transparency And Capital Structure," Working Papers wp2004_0401, CEMFI.
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  14. Bentolila, Samuel & Michelacci, Claudio & Suarez, Javier, 2004. "Social Contacts and Occupational Choice," CEPR Discussion Papers 4308, C.E.P.R. Discussion Papers.
  15. Josep Pijoan-Mas, 2006. "Precautionary Savings or Working Longer Hours?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 326-352, April.
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  19. Claudio Michelacci & David Lopez-Salido, 2007. "Technology Shocks and Job Flows," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1195-1227.
  20. Evans, David S & Padilla, Atilano Jorge, 2004. "Excessive Prices: Using Economics to Define Administrable Legal Rules," CEPR Discussion Papers 4626, C.E.P.R. Discussion Papers.
  21. Caruana, Guillermo & Einav, Liran & Quint, Daniel, 2007. "Multilateral bargaining with concession costs," Journal of Economic Theory, Elsevier, vol. 132(1), pages 147-166, January.
  22. Gerard Llobet & Meritxell Albertí & Ángel León, 2003. "Evaluation Of A Taxi Sector Reform: A Real Options Approach," Working Papers wp2003_0312, CEMFI.
  23. Edward Simpson Prescott, 2004. "Auditing And Bank Capital Regulation," Working Papers wp2004_0412, CEMFI.
  24. Repullo, Rafael & Suarez, Javier, 2003. "Loan Pricing Under Basel Capital Requirements," CEPR Discussion Papers 3917, C.E.P.R. Discussion Papers.
  25. Ana Fernandes, 2005. "Knowledge, Technology Adoption and Financial Innovation," Diskussionsschriften dp0513, Universitaet Bern, Departement Volkswirtschaft.
  26. Andreoni, James, 2006. "Philanthropy," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  27. Samuel Bentolila & Juan F. Jimeno, 2003. "Spanish Unemployment: The End of the Wild Ride?," CESifo Working Paper Series 940, CESifo Group Munich.
  28. David S. Evans & A. Jorge Padilla, 2004. "Designing Antitrust Rules For Assessing Unilateral Practices: A Neo-Chicago Approach," Working Papers wp2004_0417, CEMFI.
  29. Laura Marsiliani & Thomas Renstrom, 2002. "On Income Inequality and Green Preferences," Wallis Working Papers WP30, University of Rochester - Wallis Institute of Political Economy.
  30. Javier Alvarez & Manuel Arellano, 2004. "Robust Likelihood Estimation Of Dynamic Panel Data Models," Working Papers wp2004_0421, CEMFI.
  31. Carro, Jesus M., 2007. "Estimating dynamic panel data discrete choice models with fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 503-528, October.
  32. Enrique Sentana & Giorgio Calzolari & Gabriele Fiorentini, 2004. "Indirect Estimation Of Conditionally Heteroskedastic Factor Models," Working Papers wp2004_0409, CEMFI.
  33. Marta González & Josep Pijoan-Mas, 2005. "The Flat Tax Reform: A General Equilibrium Evaluation For Spain," Working Papers wp2005_0505, CEMFI.
  34. Claudio Michelacci & Vincenzo Quadrini, 2005. "Borrowing from Employees: Wage Dynamics with Financial Constraints," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 360-369, 04/05.
  35. Manuel Arellano & Jinyong Hahn, 2005. "Understanding Bias In Nonlinear Panel Models: Some Recent Developments," Working Papers wp2005_0507, CEMFI.
  36. Manuel Arellano, 2003. "Modelling Optimal Instrumental Variables For Dynamic Panel Data Models," Working Papers wp2003_0310, CEMFI.
  37. Fiorentini, Gabriele & Sentana, Enrique & Calzolari, Giorgio, 2004. "On the validity of the Jarque-Bera normality test in conditionally heteroskedastic dynamic regression models," Economics Letters, Elsevier, vol. 83(3), pages 307-312, June.
  38. Timothy J. Feddersen & Thomas W. Gilligan, 2001. "Saints and Markets: Activists and the Supply of Credence Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 149-171, 03.
  39. Juan J. Dolado & Vanesa Llorens, 2004. "Gender Wage Gaps By Education In Spain: Glass Floors Vs. Glass Ceilings," Working Papers wp2004_03, CEMFI.
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