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A Rent-Seeking Model of Voluntary Overcompliance

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  • Marco A. Haan

    (FEB/IEEF, University of Groningen)

Abstract

We provide an explanation for voluntary overcompliance, the phenomenon in which firms voluntarily choose to overcomply with environmental regulations. In our model, a polluting firm faces a rent-seeking contest with an environmental group. By making a small concession beforehand, i.e. by overcomplying voluntary, the firm lowers the stake the environmental group has in the rent seeking contest, which lowers the group’s lobbying effort in that contest. Voluntary overcompliance increases social welfare, yet the firm undersupplies overcompliance from a welfare point of view. An increase in the effectiveness of lobbying of the environmental group, increases the level of overcompliance.

Suggested Citation

  • Marco A. Haan, 2016. "A Rent-Seeking Model of Voluntary Overcompliance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 297-312, September.
    • Handle: RePEc:kap:enreec:v:65:y:2016:i:1:d:10.1007_s10640-015-9973-2
    DOI: 10.1007/s10640-015-9973-2
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    References listed on IDEAS

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    1. Lyon,Thomas P. & Maxwell,John W., 2004. "Corporate Environmentalism and Public Policy," Cambridge Books, Cambridge University Press, number 9780521819473, January.
    2. Stefan Lutz & Thomas P. Lyon & John W. Maxwell, 2000. "Quality Leadership when Regulatory Standards are Forthcoming," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 331-348, September.
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    4. Shimshack, Jay P. & Ward, Michael B., 2008. "Enforcement and over-compliance," Journal of Environmental Economics and Management, Elsevier, vol. 55(1), pages 90-105, January.
    5. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, March.
    6. Maxwell, John W & Lyon, Thomas P & Hackett, Steven C, 2000. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 583-617, October.
    7. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    8. Markus Kitzmueller & Jay Shimshack, 2012. "Economic Perspectives on Corporate Social Responsibility," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 51-84, March.
    9. repec:bla:jindec:v:48:y:2000:i:3:p:331-48 is not listed on IDEAS
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    Cited by:

    1. Michael Finus & Bianca Rundshagen, 2016. "Game Theory and Environmental and Resource Economics—In Honour of Alfred Endres, Part Two," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 1-4, September.
    2. Marco A. Haan, 2016. "A Rent-Seeking Model of Voluntary Overcompliance: Addendum," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 313-315, September.

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    More about this item

    Keywords

    Voluntary overcompliance; Regulation; Rent-seeking;
    All these keywords.

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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