Regulation and opportunism: How much activism do we need?

Aleix Calveras, Juan-José Ganuza and Gerard Llobet

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper analyzes 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 regulation is the outcome of a political process, an increase in activism might imply an 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.

Keywords: Activism; Corporate Social Responsability; Voting and Regulation (search for similar items in EconPapers)
JEL-codes: D72 H42 L51 M14 Q52 (search for similar items in EconPapers)
Date: 2005-09
New Economics Papers: this item is included in nep-pbe and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Regulation and Opportunism: How Much Activism Do We Need? (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:935

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