Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154913
Authors: 
Maxwell, John W.
Lyon, Thomas Peyton
Hackett, Steven Curtis
Year of Publication: 
1998
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 55.1998
Abstract: 
We extend the economic theory of regulation to allow for strategic self-regulation that preempts political action. When political "entry" is costly for consumer, firms can deter it through voluntary restraints. Unlike standard entry models, deterrence is achieved by over-investing to raise the rival's welfare in the event of entry. Empirical evidence on releases of toxic chemicals shows that an increased threat of regulation (as proxied by increased membership in conservation groups) indeed induces firms to reduce toxic releases. We establish conditions under which self-regulation, if it occurs, is a Pareto improvement once costs of influencing policy are included.
Subjects: 
Regulation
Environment
Self-regulation
Political Economy
JEL: 
D72
K32
L51
Q28
Document Type: 
Working Paper

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