The economics of eco-labeling: Standards, costs and prices

Arda Yenipazarli

International Journal of Production Economics, 2015, vol. 170, issue PA, 275-286

Abstract: The existing eco-label landscape is fragmented because of the presence of numerous labels with different standards and is a pre-competitive environment for firms to play in with many unanswered questions. Different standards – eco-labels are built around – have different effects on credibility and legitimacy, costs and benefits, and ability to achieve sustainability goals of eco-labeling. Focusing on eco-label standards and using a Hotelling-type horizontal differentiation model, we identify standards-specific issues for and characterize primary barriers to eco-labeling. Some of the major findings are as follows: (1) More rigorous environmental standards enforced by higher-integrity labels do not necessarily translate into higher selling prices; (2) Higher prices commanded by labeled products do not guarantee that a firm will derive higher profits from eco-labeling; (3) Auditing fees paid per product unit being inspected for ensuring compliance with an eco-label standard (rather than participation fees paid up front) is the primary de facto barrier to business involvement in eco-labeling; and (4) Customers׳ willingness to pay price premiums for eco-labeled products is not a sufficient condition to generate a premium in the market.

Keywords: Eco-labels; Imperfect consumer information; Horizontal differentiation; Pricing (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527315003709
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:170:y:2015:i:pa:p:275-286

DOI: 10.1016/j.ijpe.2015.09.032

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().