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Negotiating a Voluntary Agreement When Firms Self-Regulate

Abstract : Does self-regulation improve social welfare? We develop a policy game featuring a regulator and a firm that can unilaterally commit to better environmental or social behavior in order to preempt future public policy. We show that the answer depends on the set of policy instruments available to the regulator. Self-regulation improves welfare if the regulator can only use mandatory regulation: it reduces welfare when the regulator opts for a voluntary agreement. This suggests that self-regulation and voluntary agreements are not good complements from a welfare point of view. We derive the policy implications, and extend the basic model in several dimensions.
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Submitted on : Tuesday, October 26, 2010 - 10:47:26 AM
Last modification on : Friday, December 11, 2020 - 8:58:01 PM
Long-term archiving on: : Thursday, January 27, 2011 - 2:47:58 AM

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Pierre Fleckinger, Matthieu Glachant. Negotiating a Voluntary Agreement When Firms Self-Regulate. Journal of Environmental Economics and Management, Elsevier, 2011, 62 (1), pp.41-52. ⟨10.1016/j.jeem.2011.03.002⟩. ⟨hal-00529632⟩

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