Private Politics and Public Regulation
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.
We are grateful to David Baron, Marco Battaglini, Ernesto Dal Bó, Daniel Diermeier, John Morgan, Pierre Yared, and participants of the Political Economy at Chicago Area (PECA) conference in 2011, Strategy and Business Environment conference in 2012, NGO workshop at LSE in 2012, NBER Summer Institute meetings in 2012, and seminars at UC Berkeley, London School of Economics, University of Oslo, Princeton University, Stanford GSB, and New Economic School for valuable comments, and to Arda Gucler and Anders Hovdenes for excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Georgy Egorov & Bård Harstad, 2017. "Private Politics and Public Regulation," Review of Economic Studies, Oxford University Press, vol. 84(4), pages 1652-1682. citation courtesy of