Topics 6-8 Flashcards
What are 3 examples of NGOs?
- Greenpeace
- Rainforest Action Network (RAN)
- Sierra Club
Why are there more NGO campaigns? (4 reasons)
- Communication costs decreasing
- Public trust in corporations is declining
- Government bureaucracy is getting thicker
- Businesses are becoming more global
What is “private politics?”
Direct interactions between firms and NGOs
What are the 4 normal political issue stages?
- Development
- Politicization
- Legislative
- Implementation
How is the legislative phase replaced in private politics?
NGOs make direct demands on firms (e.g., boycotts/negative PR or PR endorsements/funding)
How is the implementation stage replaced in private politics?
Resolution of the NGO-firm dispute
What characterizes a good target for a NGO campaign?
- Brand name
- Leadership in industry
- Consumer product (customer-facing)
- Low switching costs
- ‘Worst offender’ (sometimes)
- Interest in issue in past
What is strategic sustainability?
When firms incorporate sustainable business ventures in an effort to increase profits.
Why would a firm work to gain strategic sustainability?
- Improve internal efficiencies
- First mover advantage w/ industry technology
- Manage regulatory risks
- Manage growing social risks (*cough, NGOs)
- Enhance brand equity and corporate reputation
What are external damages?
A firm’s production imposes costs on a third party without their consent
What are 5 incentive mechanisms for firms to “go green?”
- Government taxation
- Tradable pollution permits
- Assign accountability for waste
- Subsidize green technology
- Green NGO incentives and pressures
What is the theory behind tradable pollution permits?
The government issues pollution permits that pertain to a permissible level of pollution and then government lets the firms trade (or buy/sell) the permits as needed.
What are 2 assumptions of the pollution permit model?
- One unit of output produces one unit of pollution (Q = Pollution)
- Marginal Abatement Costs (MAC) are measured as lost profit from decreasing output to reduce pollution (if no other technology is available)
What are 4 nice features of tradable pollution permits?
- Overall level of pollution will decrease as # of permits is decreased over time.
- More permits go to firms who value them the most
- Low abatement cost firms can gain profits by selling unused pollution permits
- Environmental groups can buy permits to reduce pollution more
What is the key criticism of tradable pollution permits?
Initial allocation of permits may go to the most politically connected firms.
What is the result of assigning accountability for a firm’s waste?
Will alleviate external damages and secondary markets for waste products will evolve (e.g., cows eating spent beer grains)
What are 3 examples of government subsidies to encourage more investments in green technology?
- Tax credits
- Grant money for green R&D
- Government-Industry partnerships
What is asymmetric information?
When one side has information it doesn’t share with the other side.
What is an example of asymmetric information that affects demand? What are the results?
- Buying used cars
- Consumers pay too much
- Too much is consumed (in terms of efficiency)
What is an example of asymmetric information that affects supply? What are the results?
- Health risks in factory not made clear to workers
- Workers under compensated relative to what is socially efficient
- Too much labor is supplied (in terms of efficiency)
What is private regulation?
Regulation that forms when customers perceive that the government quality regulations are insufficient
When is private regulation profitable for firms?
When market values additional regulation over cost of providing it
What are 3 key elements of public regulation? (KNOW DIFFERENCES FOR EXAM!)
- Don’t always consider costs of regulation
- Funded through taxes paid by all individuals
- Tend to respond only to media scares
What are 3 key elements of private regulation? (KNOW DIFFERENCES FOR EXAM!)
- Profitability depends on the efficiency of their regulations
- People that benefit from regulation pay for it
- Based on need for regulation within the industry
How much regulation is efficient?
- Not 100% safety
- MB = MC
