"Recyclable goods, green consumption and incomplete information"

Abstract : Recycling can be viewed as an impure public good : firms produce private goods with different recyclability levels, and this helps to decrease the negative externality imposed by waste. However, when consumers are environmentally concerned and recyclability is costly, firms may engage in greenwashing i.e. claim a higher recyclability of their products, without consumers knowing the true “greenness” of the good. In this preliminary project, I discuss a theoretical model in which recyclability is costly for the firm, and consumers have a preference for recyclability. The main goal is to study the impact of asymmetric information about the level of recyclability, when this parameter is private information of the firm. I aim to shed light on the welfare implications of asymmetric information and derive incentive-compatible solutions with which greenwashing does not prevail. In future developments, I also aim to explore the tradeoffs at stake when consumers may or may not take the costly action of returning the product. In this case, green firms must find ways to both distinguish their green product from non-recyclable products and induce consumers to return the product to partly retrieve some value from the materials. The role of different regulatory tools should be investigated.