Green markets and conservation behavior: Theoretical and empirical essays on private provision of environmental public goods

This dissertation consists of three distinct papers related to private provision of environmental public goods. The first chapter develops a general model for analyzing the comparative statics of "environmentally friendly" consumption. It begins with the observation that "green" products and services are impure public goods, with joint production of a private characteristic and an environmental public characteristic. The analysis provides a theoretical foundation for understanding how environmentally friendly consumption depends on market prices, green-production technologies, the availability of substitutes, and exogenously given environmental quality. The results generate new insights into the important and sometimes counterintuitive relationship between demand for environmental quality and environmentally friendly consumption.;The second chapter builds on the setup of the first in order investigate the positive and normative consequences of "green markets." While these markets are often promoted as a decentralized mechanism of environmental policy, it is shown that under quite reasonable assumptions, green markets can have detrimental effects on both environmental quality and social welfare. Conditions are then derived that are sufficient to rule out such unintended consequences. The analysis applies equally to non-environmental choice settings where the joint products of an impure public good are also available separately. Such choice settings are increasingly prevalent in the economy, with impure public goods ranging from socially-responsible investments to commercial activities associated with charitable fund-raising.;The third chapter provides a theoretical and empirical investigation of voluntary conservation behavior. A simple theoretical model highlights the relationship between (i) voluntary restraint on the consumption of goods and services that generate negative environmental externalities, and (ii) willingness to pay a voluntary price premium for goods and services that are more environmentally friendly. The model generates a series of novel predictions, which are then tested in an empirical study of household electricity consumption with introduction of a price-premium, green-electricity program. The results are consistent with all of the theoretical predictions and provide evidence of voluntary restraint and its relation to a voluntary price premium.