Private Politics and Private Policy: A Theory of Boycotts
Stanford University, GSB Working Paper No. RP1766
44 Pages Posted: 19 Mar 2003
Date Written: December 2002
Public policies such as regulation, antitrust, and international trade are the result of public politics - a competition over who gets what with government the arbiter of that competition. Policies are a so chosen by private parties without the command or sanction of government. Private policies often result from pressure from interest groups that can be independent of government. Such activity and the responses to it represent private politics - a competition over who gets what that takes place outside the arenas of government. This paper provides a theory of private politics focusing on an activist that generates a boycott to induce a firm to change its policies. The mode consists of two games. In the first members of the public decide when and how much to boycott the firm based on information they receive. A person's action reveals information, which represents a public good, and that person has an incentive to act early so as to lead others to act. In the second game the activist and the firm bargain to settle the boycott, and the settlement represents a private policy. The equilibrium of the games provides an industrial organization of activist groups, their targets, and the issues that attract boycotts.
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