Green Clubs

Klaas van 't Veld () and Matthew Kotchen

No 16627, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D71 H41 Q58 (search for similar items in EconPapers)
Date: 2010-12
Note: EEE PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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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Journal Article: Green clubs (2011)
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