Self-Regulation, Negotiated Agreements and Social Welfare
The literature on voluntary agreements studies self-regulation, negotiated agreements and public voluntary programs, typically in the shadow of a legislative threat. Prior studies have examined each of these instruments in isolation, but interactions between them have received less attention. We show that in the presence of multiple voluntary instruments, equilibrium outcomes and welfare results depend critically on the timing of moves and the bargaining power of each player. In contrast to prior work, we find conditions under which a full-information equilibrium involves self-regulation and no negotiated agreement. We also show that the opportunity to sign a negotiated agreement only reduces welfare when the regulator has little bargaining power and the firm can commit to an inefficient threat to eschew self-regulation should negotiations fail. More generally, we stress the need for the literature to take account of the "technological detail" of particular contexts when studying voluntary agreements.
|Date of creation:||Jul 2012|
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- Maxwell, John W & Lyon, Thomas P & Hackett, Steven C, 2000.
"Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism,"
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- Mathias Dewatripont & Patrick Bolton, 2005.
ULB Institutional Repository
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Oxford University Press, vol. 20(1), pages 148-169, April.
- Thomas P. Lyon & Eric Rasmusen, 2004. "Buyer-Option Contracts Restored: Renegotiation, Inefficient Threats, and the Hold-Up Problem," Working Papers 2004-10, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
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Department of Economics Working Papers
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- Matthew J. Kotchen, 2006. "Green Markets and Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 816-845, August.
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- Hoppe, Eva I. & Schmitz, Patrick W., 2011.
"Can contracts solve the hold-up problem? Experimental evidence,"
Games and Economic Behavior,
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- Hoppe, Eva I & Schmitz, Patrick W, 2009. "Can Contracts Solve the Hold-Up Problem? Experimental Evidence," CEPR Discussion Papers 7205, C.E.P.R. Discussion Papers.
- Allen Blackman, 2010. "Alternative Pollution Control Policies in Developing Countries," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 234-253, Summer.
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- Denicolò, Vincenzo, 2008. "A signaling model of environmental overcompliance," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 293-303, October.
- Segerson, Kathleen & Miceli, Thomas J., 1998. "Voluntary Environmental Agreements: Good or Bad News for Environmental Protection?," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 109-130, September.
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