Setting the Stakes in Environmental Contests

Firms are frequently in conflict with environmental groups over planning and other decisions. Standard contest models assume that stakes are exogenously defined which is inappropriate in settings (such as application for building permission) in which one player also acts as proposer. Assuming that proposers foresee environmental opposition they will adjust their proposals strategically. By introducing an additional stage to the lobbying game the full impact of the dispute process can be reckoned. The structure of the game—the order in which the players move—is shown to have a significant impact on social welfare and may warrant intervention. Among other things, there may be social gains to forcing the developer to move last in planning disputes.