Chapter 2 constitutes the core theoretical chapter of the book. It serves two functions. First, it introduces the micro–institutional rational choice approach that is applied throughout the work. It explains why producers targeted by market-driven regulatory governance can be considered boundedly rational actors, what this characterization entails, and how institutional arrangements can help such actors to overcome collective action problems. It then shows how Kiser and Ostrom’s Three Worlds of Action can be leveraged to link institutional design choices to their outcomes. In a second step, Chapter 2 examines market-driven regulatory governance using this approach. It uncovers the institutional design dilemma that standards face as they scale up, and specifies a number of hypotheses on how these choices (e.g., between binding and flexible standard–setting; strict or flexible oversight mechanisms; and a focus on price premiums or on capacity building) will affect the implementation of standards by drawing on institutional rational choice theory as well as insights from the socio-legal literature.