Working Paper: NBER ID: w19737
Authors: Georgy Egorov; BRD Harstad
Abstract: We develop a dynamic game to explore the interaction between regulation and private policies, such as self-regulation by firms and activism. Without a public regulator, the possibility of self-regulation is bad for the firm, but good for activists who are willing to maintain a costly boycott to raise the likelihood of self-regulation. Results are reversed when the regulator is present: the firm then self-regulates to preempt public regulation, while activists start and continue boycotts to raise the likelihood of such regulation. Our analytical results describe when a boycott is likely, and when it may be expected to be short and/or successful. The model generates a rich set of testable comparative statics.
Keywords: private politics; public regulation; self-regulation; activism; boycotts
JEL Codes: D78; L31; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Presence of a public regulator (L59) | Likelihood of boycotts (J52) |
| Presence of a public regulator (L59) | Duration of boycotts (J52) |
| Firm self-regulation (L10) | Likelihood of public regulation (G18) |
| Activists' campaigns (D72) | Regulatory actions (G18) |
| Self-regulation is costly for the firm (G38) | Probability of successful boycott (D74) |
| Boycott is costly for the activist (J52) | Probability of successful boycott (D74) |
| Expected likelihood of public regulation (K20) | Activist motivation to continue boycott (D74) |