Pollution Policy: the Role for Publicly Provided Information

This paper identifies a market failure in the provision of information about polluting consumer products and argues that there is a role for public information provision if no other policy instruments are available. The market failure arises because the individual consumer does not take full account of the benefit she bestows on other consumers if acquired information leads her to reduce her consumption of the polluting product. If a corrective tax is available then the role for public information provision is reduced to one of ensuring that the corrective tax is informationally consistent with the equilibrium it induces.