SGS Brownbag - Lukas von Flüe, HEC Lausanne

Discussions of the environmental impact that revolve around monetary incentives and

other easy-to-measure factors are important, but they neglect culture. Pro-environmental

values will be crucial when facing sustainability challenges in the Anthropocene, and de-

mand among green consumers is arguably critical to incentivise sustainable production.

However, due to asymmetric information, consumers might not know whether the pre-

mium they pay for green production is well-spent. Reliable monitoring of producers is

meant to solve this problem. To see how this might work, we develop and analyse a

game theoretic model of a simple buyer-seller exchange with asymmetric information,

and our analysis shows that green-washing can exist exactly because reliable monitoring

co-exists with unreliable monitoring. More broadly, promoting pro-environmental val-

ues among consumers might even amplify the problem at times because a producer with

significant market power can exploit both consumer preferences for sustainability and

trustworthy monitoring to gouge prices and in extreme cases green wash in plain sight.

We discuss several strategies to address this problem. Promoting accurate beliefs and a

large-scale behavioural change based on pro-environmental values might be necessary for

a rapid transition to a sustainable future, but recent evidence from the cultural evolution

literature highlights many important challenges.