Radical Activism and Self-regulation: An Optimal Campaign Mechanism

We study the problem faced by activists who want to maximize firms'compliance with high environmental standards. Our focus is on radical activism which relies on non-violent civil disobedience. The threat of disruptive actions is used to force firms to concede i.e., to engage in self-regulation. We adopt a mechanism design approach to characterize an optimal campaign. The analysis informs that the least vulnerable and most polluting firms should be targeted with disruptive actions while the others are granted a guarantee not to be targeted in exchange for a concession. This characterization allows studying the determinants of the activist's strength and how it is affected by repression, a central feature in civil disobedience. We find that an optimal campaign is relatively resilient to repression and that it creates incentives to free ride in prosecution for individual firms. Next, we consider heterogeneity in firms'abatement cost to find that an optimal campaign optimizes the allocation of abatment efforts and creates incentives for innovation. We discuss some other welfare properties of optimal campaign.