Regulation and Opportunism: How Much Activism Do We Need?

30 Pages Posted: 20 Jul 2007

See all articles by Aleix Calveras

Aleix Calveras

Universitat de les Illes Balears

Juan-José Ganuza

Universitat Pompeu Fabra (UPF) - Faculty of Economic and Business Sciences

Gerard Llobet

Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR)

Date Written: September 2005

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

JEL Classification: D72, H42, L51, M14, Q52

Suggested Citation

Calveras, Aleix and Ganuza, Juan and Llobet, Gerard, Regulation and Opportunism: How Much Activism Do We Need? (September 2005). Available at SSRN: https://ssrn.com/abstract=1001883 or http://dx.doi.org/10.2139/ssrn.1001883

Aleix Calveras

Universitat de les Illes Balears ( email )

Ed. Jovellanos, Cra. Valldemossa km 7,5 Campus UIB
Palma, Illes Balears 07122
Spain

Juan Ganuza (Contact Author)

Universitat Pompeu Fabra (UPF) - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 19 (Phone)
(34-98) 542 17 46 (Fax)

Gerard Llobet

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
SPAIN
34 91 429 0551 (Phone)
34 91 429 1056 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
101
Abstract Views
1,080
Rank
564,844
PlumX Metrics