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But What Does it Mean? Competition between Products Carrying Alternative Green Labels when Consumers are Active Acquirers of Information

Anthony Heyes, Sandeep Kapur, Peter W. Kennedy, Steve Martin and John W. Maxwell
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Anthony Heyes: University of Ottawa
Sandeep Kapur: Birkbeck, University of London
Peter W. Kennedy: University of Victoria
Steve Martin: Statistics Canada
John W. Maxwell: Indiana University

No 1812, Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics

Abstract: Programs that certify the environmental (or other social) attributes of firms are common.But the proliferation of labeling schemes makes it difficult for consumers to know what each one mean – what level of `greenness' does a particular label imply? We provide the first model in which consumers can expend effort to learn what labels mean. The relationship between information acquisition costs, firm pricing decisions, the market shares obtained by alternatively-labeled goods and a brown `backstop' good, and total environmental impact prove complex.Consumer informedness can have perverse implications. In plausible cases a reduction in the cost of information damages environmental outcomes. Our results challenge the presumption that provision of environmental information to the public is necessarily good for welfare or the environment.

Keywords: Eco-labeling; green consumerism; information-based instruments. (search for similar items in EconPapers)
JEL-codes: D83 L15 L31 Q52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
Date: 2018-11
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