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Green clubs

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  • van't Veld, Klaas
  • Kotchen, Matthew J.
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    Abstract

    This paper treats programs in which firms voluntarily agree to meet environmental standards as “green clubs”: clubs, because they provide non-rival but excludable reputation benefits to participating firms; green, because they also generate environmental public goods. The model illuminates a central tension between the congestion externality familiar from conventional club theory and the free-riding externality familiar from the theory on private provision of public goods. We compare three common program sponsors—governments, industry, and environmental groups. We find that if monitoring of the club standard is perfect, a government constrained from regulating club size may prefer to leave sponsorship to industry if public-good benefits are sufficiently low, or to environmentalists if public-good benefits are sufficiently high. If monitoring is imperfect, an important question is whether consumers can infer that a club is too large for its standard to be credible. If they can then the government may deliberately choose an imperfect monitoring mechanism as a way of regulating club size indirectly. If they cannot then this reinforces the government's preference for delegating sponsorship.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0095069611000957
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

    Volume (Year): 62 (2011)
    Issue (Month): 3 ()
    Pages: 309-322

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    Handle: RePEc:eee:jeeman:v:62:y:2011:i:3:p:309-322

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    Web page: http://www.elsevier.com/locate/inca/622870

    Related research

    Keywords: Green markets; Clubs; Public goods; Eco-certification programs;

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    Cited by:
    1. Grazia Cecere & Susanna Mancinelli & Massimiliano Mazzanti, 2013. "Waste Prevention and Social Preferences: The Role of Intrinsic and Extrinsic Motivations," Working Papers 2013.44, Fondazione Eni Enrico Mattei.
    2. Massimiliano Mazzanti & Valeria Costantini & Susanna Mancinelli & Massimilano Corradini, 2011. "Environmental and Innovation Performance in a Dynamic Impure Public Good Framework," Working Papers 201117, University of Ferrara, Department of Economics.
    3. Corradini, Massimiliano & Costantini, Valeria & Mancinelli, Susanna & Mazzanti, Massimiliano, 2014. "Unveiling the dynamic relation between R&D and emission abatement," Ecological Economics, Elsevier, vol. 102(C), pages 48-59.
    4. Todd Sandler, 2013. "Buchanan clubs," Constitutional Political Economy, Springer, vol. 24(4), pages 265-284, December.
    5. Sexton, Steven E. & Sexton, Alison L., 2014. "Conspicuous conservation: The Prius halo and willingness to pay for environmental bona fides," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 303-317.

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