Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism
We extend the economic theory of regulation to allow for strategic self-regulation that preempts political action. When political "entry" is costly for consumers, firms can deter it through voluntary restraints. Unlike standard entry models, deterrence is achieved by overinvesting to raise the rival's welfare in the event of entry. Empirical evidence on releases of toxic chemicals shows that an increased threat of regulation (as proxied by increased membership in conservation groups) indeed induces firms to reduce toxic releases. We establish conditions under which self-regulation, if it occurs, is a Pareto improvement once costs of influencing policy are included. Copyright 2000 by the University of Chicago.
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| Length: | |
| Date of creation: | 1995 |
| Handle: | RePEc:fth:chices:122 |
| Contact details of provider: | Postal: UNIVERSITY OF CHICAGO, CENTER FOR STUDY OF THE ECONOMY AND THE STATE, 1101 E. 58TH STREET CHICAGO ILLINOIS 60637. Web page: http://research.chicagobooth.edu/economy/ More information through EDIRC
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References listed on IDEAS
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- Thomas P. Lyon, 1991. "Regulation with 20-20 Hindsight: "Heads I Win, Tails You Lose"?," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 581-595, Winter.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
- Braeutigam, Ronald R & Quirk, James P, 1984. "Demand Uncertainty and the Regulated Firm," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 45-60, February.
- Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
- Alberini, Anna & Austin, David, 1999.
"On and Off the Liability Bandwagon: Explaining State Adoptions of Strict Liability in Hazardous Waste Programs,"
Journal of Regulatory Economics,
Springer, vol. 15(1), pages 41-63, January.
- Austin, David & Alberini, Anna, 1997. "On and Off the Liability Bandwagon: Explaining State Adoptions of Strict Liability in Hazardous Waste Programs," Discussion Papers dp-98-08, Resources For the Future.
- Shabtai Donnenfeld & Shlomo Weber, 1995. "Limit Qualities and Entry Deterrence," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 113-130, Spring.
- Donnenfeld, S. & Weber, S., 1991. "Limit Qualities and Entry Deterrence," Papers 92-4, York (Canada) - Department of Economics.
- Amihai Glazer & Henry McMillan, 1992. "Pricing by the Firm Under Regulatory Threat," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 1089-1099.
- Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
- Richard Gilbert & Xavier Vives, 1986. "Entry Deterrence and the Free Rider Problem," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 71-83.
- Maloney, Michael T & McCormick, Robert E, 1982. "A Positive Theory of Environmental Quality Regulation," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 99-123, April.
- Pirrong, Stephen Craig, 1995. "The Self-Regulation of Commodity Exchanges: The Case of Market Manipulation," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 141-206, April. Full references (including those not matched with items on IDEAS)
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