Bunching with the Stars: How Firms Respond to Environmental Certification

Sebastien Houde ()
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Sebastien Houde: ETH Zurich, Switzerland

No 18/292, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: This paper shows that firms respond strategically to ENERGY STAR, a voluntary certification program for energy-efficient products. Firms offer products that bunch at the certification requirement, differentiate certified products in energy and non-energy dimensions, and charge a price premium on certified products. In the US refrigerator market, the magnitude of the price premium corresponds exactly to the average willingness to pay consumers have for certified products. This suggests that firms have the ability to extract most of the consumer surplus associated with certified products. If firms had to pay a fee to use the certification, a policy recently suggested, most of the cost should then be borne by consumers. I illustrate how such policy would impact the adoption of energy-efficient appliances.

Keywords: environmental certification; firm behavior; energy efficiency; imperfect competition (search for similar items in EconPapers)
JEL-codes: L13 L15 Q48 Q58 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2018-07
New Economics Papers: this item is included in nep-com, nep-ene, nep-env and nep-reg
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:18-292

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