AbstractThis 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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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16627.
Date of creation: Dec 2010
Date of revision:
Publication status: published as van ‘ t Veld, K. and M. Kotchen, “Green Clubs,” Journal of Environmental Economics and Management , 62 (2011) 309 - 322.
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Find related papers by JEL classification:
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
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- Roberto Rodríguez-Ibeas, 2007. "Environmental Product Differentiation and Environmental Awareness," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 36(2), pages 237-254, February.
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"Environmental and Innovation Performance in a Dynamic Impure Public Good Framework,"
201117, University of Ferrara, Department of Economics.
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