Radical activism and self-regulation: An optimal campaign mechanism

Abstract

This article studies 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 indicates 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 concessions. This characterization allows us to study 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 the prosecution for individual firms. Next, we consider heterogeneity in firms’ abatement costs and find that an optimal campaign optimizes the allocation of abatement efforts and creates incentives for innovation. We discuss some other welfare properties of the optimal campaign.