Green Clubs / Klaas van 't Veld, Matthew J. Kotchen.

Format:

Book

Author/Creator:

Veld, Klaas van 't.

Contributor:

National Bureau of Economic Research.

Kotchen, Matthew J., 1971-

Series:

Working Paper Series (National Bureau of Economic Research) no. w16627.

NBER working paper series no. w16627

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

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.

Notes:

Print version record

December 2010.