Voluntary Agreements Design Considerations: Generally

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Designing environmentally effective and efficient voluntary agreements requires consideration of many factors.  Most important among them are (1) the potential for interest group pressure and exploitation; (2) the signaling value (to environmentally aware consumers, and to competing firms) of voluntary agreements, and especially whether they can generate increased sales among environmentally-conscious consumers; (3) whether voluntary agreements are backed up by a credible threat of regulation if the voluntary program is not effective; (4) how risk aversion might affect decisions to participate; and (5) whether and to what extent consumers will change their behavior—presumably by shifting their purchases towards proactive firms—when voluntary agreements are publicized.