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Summary Week 5 Video Lectures BSS MCM

- 2021 - 2022
116 Flashcards & Notes
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A snapshot of the summary - Week 5 Video Lectures BSS MCM

  • 1 King & Toffel, 2009

  • What are the 2 reasons why self-regulation exists?
    1. Collective reputation and risk of common sanctions.
    2. Asymmetric information - "credence goods".
  • Four questions are addressed in this paper regarding self-regulation?
    1. What is it? 
    2. Why does it exist? 
    3. Why do firms join? 
    4. Are they effective? 
  • 1.1 Collective reputation and the risk of common sanctions

  • What does 'collective reputation' in this reason mean?
    You can have a collective reputation for firms that are in the same industry.
  • With a 'collective reputation' what is the 'risk of common sanctions'?
    Because you have a collective reputation, there is a risk that there will be sanctions imposed which will be faced by companies in an industry together.
  • What is an example of a 'risk of common sanctions'?
    There is an incident and a government regulates the entire industry.
  • To avoid the incidents that can lead to industry regulations, as what can the 'risk of common sanctions' be seen?
    What motivates industry members to find a way to avoid such incidents by self-regulating.
  • 1.2 Asymmetric information - "credence goods"

  • What are "credence goods"?
    Goods for which certain attributes are unobservable before and after consumption.
  • Where does the argument of Asymmetric information - "credence goods" stem from?
    There are certain goods, for which consumers do not have all the information that they need to make an informed decision about whether or not to purchase it.
  • What do we need due to these information asymmetries about products?
    Certain institutions to provide this additional information through e.g. an organic label. To straighten the asymmetrie and let consumers make more informed decisions.
  • 1.3 Why do firms join self-regulatory institutions?

  • Why do firms join self-regulatory initiatives?
    1. Institutional pressures (e.g. Customers, civil society, industry norms).
    2. Strategic choice.
      1. Signal superior EP.
      2. Avoid stricter monitoring.
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