We present a theoretical framework where an investor who values sustainability decides whether or not to invest into a firm. The firm, sustainable or not, discloses information about how green she operates with the aim to obtain the investor money. We first show that without the possibility of convincingly communicating anti climate change activities, there is no economic incentive to increase such actions and it might even lead to a reduction in these costly efforts by initially sustainable firms. (Personal concivtions of firm owners might be the sole exception here.) Second, we show that investors benefit from climate initiatives that only allow truly sustainably firms to join. Thirdly, we discuss how strict or loose these climate initiatives should optimally be, and introduce a second period in our model. Finally, we investigate the effects of a general obligation for sustainability reporting. In our analyses, we consider the effect of climate certificates on investors and firms as well as their contribution against climate change. Our paper adds to the exisiting literature by incorporating the effects of investor behaviour, and by providing a 2-period dynamic model of green certificates.
Status: working paper in preparation.
It has been shown that most people do not update their belief following Bayes rule. However, in these settings people's emotions often affect their decision making. We want to eliminate that factor and examine how and why people still deviate from the behaviour of a risk-neutral Bayesian behavior. Our experiment is designed to examine direction and causality of this derivation. Different to previous work, our focus lies on the role of higher order information. We offer subjects to learn the precision of a previously observed message. By eliciting their willingness to pay to learn as well as to avoid message precision, and by observing how it is incorporated into their updated belief, we describe a market for second order information. Our paper can be linked to Augenblick et al. (2025), as well as to literature on information avoidance.
Status: working paper in preparation.
We axiomatically develop a power index for knowledge structures.
Status: early stage.