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A signaling model of environmental overcompliance

[journal article]

Denicolò, Vincenzo

Abstract

We present a theory of unilateral regulatory overcompliance as a signaling device. Firms that have a competitive advantage in the use of a cleaner but more costly technology overcomply in order to signal to an imperfectly informed, benevolent government that compliance costs are low, thereby trigger... view more

We present a theory of unilateral regulatory overcompliance as a signaling device. Firms that have a competitive advantage in the use of a cleaner but more costly technology overcomply in order to signal to an imperfectly informed, benevolent government that compliance costs are low, thereby triggering tougher regulation. We identify the conditions under which such an overcompliance signaling equilibrium arises, showing that there may be over-overcompliance in that firms may overcomply even when tougher regulation is not socially desirable. We also discuss the differential implications of the signaling theory as compared to other theories of unilateral regulatory overcompliance.... view less

Classification
Political Economy
Economic Policy

Free Keywords
Voluntary actions; Overcompliance; Signaling; Regulation; Raising rivals' costs; D43; D82; L51

Document language
English

Publication Year
2008

Page/Pages
p. 293-303

Journal
Journal of Economic Behavior & Organization, 68 (2008) 1

DOI
https://doi.org/10.1016/j.jebo.2008.04.009

Status
Postprint; peer reviewed

Licence
PEER Licence Agreement (applicable only to documents from PEER project)


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© 2007 - 2025 Social Science Open Access Repository (SSOAR).
Based on DSpace, Copyright (c) 2002-2022, DuraSpace. All rights reserved.