January 9, 2011

Green Clubs

by Klaas van 't Veld and Matthew J. Kotchen

- 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.

van 't Veld, K. and M.J. Kotchen (2010). "Green Clubs." NBER Working Paper No. 16627, Dec 2010.