Monitoring Eco-Labels: You Can Have Too Much of a Good Thing

Thomas Liebi

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: An increasing number of product labels is making environmental claims. Typically, these claims are non-verifiable to consumers, they represent a credence attribute of the product. The usual way to handle this problem is external monitoring of such labels. We consider a model where firms in a competitive market choose product quality and the intensity of monitoring. It is shown that all the firms producing the high quality credence good will choose the same level of monitoring, i.e., an industry standard will evolve. However, in a competitive equilibrium there will be more monitoring than is socially desirable.

Keywords: credence goods; labels; monitoring; product quality (search for similar items in EconPapers)
JEL-codes: D82 L15 (search for similar items in EconPapers)
Date: 2002-07
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (5)

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