Misinformation and its Implications for Green Markets

This paper develops and analyzes a model of misinformation in markets for so-called “green” products, and more generally, impure public goods. Unlike previous studies of green goods, I account for strategic interactions between consumers and consider equilibrium outcomes under misinformation. A major finding is that misinformation can help or harm environmental quality and welfare, and the direction of these changes depends critically upon whether “green” or “brown” consumers are more likely to be misinformed. These results are particularly germane to markets where nascent methods for analyzing environmental impacts, like lifecycle assessments (LCA) and carbon footprinting, are applied.