Industry Self-Governance and National Security: On the Private Control of Dual Use Technologies
Private sector firms frequently sell dual use products that can be used to develop either civilian goods or weapons of mass destruction. The global character of these markets makes traditional regulation and treaty solutions difficult. Some existing initiatives by manufacturers have established private regulations that are stronger than official US policy. This paper explores the economic conditions that make such strong, industry-wide agreements stable. We assume two risks due to the dual use nature. First, upstream firms face legal liability if their products lead to a disaster. Second, a disaster may produce regulatory backlash, i.e. excessive government regulation that make downstream production prohibitive costly. We find that regulatory backlash is never an adequate substitute for perfect (i.e. full) liability and even makes the situation worse. Second, industry regulation enforced by downstream firms and optimal regulation converge when the downstream firms have strong market power. Next, we analyze when and why large downstream firms are able to force their preference for high levels of regulation on upstream suppliers. Finally we show that upstream incumbents may be able to deter entry in adopting a high regulatory standard.
|Date of creation:||2012|
|Contact details of provider:|| Web page: http://www.socialpolitik.org/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shiell, Alan & Chapman, Simon, 2000. "The inertia of self-regulation: a game-theoretic approach to reducing passive smoking in restaurants," Social Science & Medicine, Elsevier, vol. 51(7), pages 1111-1119, October.
- Na Li Dawson & Kathleen Segerson, 2008.
"Voluntary Agreements with Industries: Participation Incentives with Industry-Wide Targets,"
University of Wisconsin Press, vol. 84(1), pages 97-114.
- Na Li Dawson & Kathleen Segerson, 2003. "Voluntary Agreements with Industries: Participation Incentives with Industry-wide Targets," Working papers 2004-06, University of Connecticut, Department of Economics.
- Khanna Madhu & Widyawati Diah, 2011. "Fostering Regulatory Compliance: The Role of Environmental Self-Auditing and Audit Policies," Review of Law & Economics, De Gruyter, vol. 7(1), pages 125-160, May.
- Pizer, William A. & Morgenstern, Richard & Shih, Jhih-Shyang, 2010. "Evaluating Voluntary Climate Programs in the United States," Discussion Papers dp-08-13-rev, Resources For the Future. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc12:66052. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.