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Green Markets and Private Provision of Public Goods

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  • Matthew J. Kotchen

Abstract

This paper develops a general model of private provision of a public good that includes the option to consume an impure public good. The model is used to investigate the positive and normative consequences of "green markets," which are based on technologies with joint production of a private good and an environmental public good. It is shown that under reasonable conditions green markets can have beneficial or detrimental effects on environmental quality and social welfare. The analysis applies equally to nonenvironmental choice settings, with examples ranging from socially responsible investments to commercial activities associated with charitable fund-raising.

Suggested Citation

  • Matthew J. Kotchen, 2006. "Green Markets and Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 816-845, August.
    • Handle: RePEc:ucp:jpolec:v:114:y:2006:i:4:p:816-845
    DOI: 10.1086/506337
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    References listed on IDEAS

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    1. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, January.
    2. Kotchen, Matthew J., 2005. "Impure public goods and the comparative statics of environmentally friendly consumption," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 281-300, March.
    3. Gerard Debreu, 1963. "On a Theorem of Scarf," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 30(3), pages 177-180.
    4. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
    5. W. M. Gorman, 1980. "A Possible Procedure for Analysing Quality Differentials in the Egg Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(5), pages 843-856.
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