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Negotiating a Voluntary Agreement When Firms Self-Regulate

Author

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  • Pierre Fleckinger

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Matthieu Glachant

    (CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

Abstract

Does self-regulation improve social welfare? We develop a policy game featuring a regulator and a firm that can unilaterally commit to better environmental or social behavior in order to preempt future public policy. We show that the answer depends on the set of policy instruments available to the regulator. Self-regulation improves welfare if the regulator can only use mandatory regulation: it reduces welfare when the regulator opts for a voluntary agreement. This suggests that self-regulation and voluntary agreements are not good complements from a welfare point of view. We derive the policy implications, and extend the basic model in several dimensions.

Suggested Citation

  • Pierre Fleckinger & Matthieu Glachant, 2011. "Negotiating a Voluntary Agreement When Firms Self-Regulate," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00529632, HAL.
    • Handle: RePEc:hal:cesptp:hal-00529632
    DOI: 10.1016/j.jeem.2011.03.002
    Note: View the original document on HAL open archive server: https://minesparis-psl.hal.science/hal-00529632v1
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    Cited by:

    1. Ambec, Stefan & De Donder, Philippe, 2022. "Environmental policy with green consumerism," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    2. Contreras, Gabriela & Bos, Jaap W.B. & Kleimeier, Stefanie, 2019. "Self-regulation in sustainable finance: The adoption of the Equator Principles," World Development, Elsevier, vol. 122(C), pages 306-324.
    3. Miranda, Bruno Varella & de Oliveira, Gustavo Magalhães, 2023. "Assessing the performance of voluntary environmental agreements under high monitoring costs: Evidence from the Brazilian Amazon," Ecological Economics, Elsevier, vol. 214(C).
    4. Arimura, Toshi H. & Kaneko, Shinji & Managi, Shunsuke & Shinkuma, Takayoshi & Yamamoto, Masashi & Yoshida, Yuichiro, 2019. "Political economy of voluntary approaches: A lesson from environmental policies in Japan," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 41-53.
    5. Kathleen Segerson, 2013. "Voluntary Approaches to Environmental Protection and Resource Management," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 161-180, June.
    6. Buckley, Ralf, 2013. "Social-benefit certification as a game," Tourism Management, Elsevier, vol. 37(C), pages 203-209.

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