The Market for "Harmful Component-Free" Products under Pressure from the NGOs

Dorothée Brécard and Mireille Chiroleu-Assouline

No 8389, CESifo Working Paper Series from CESifo

Abstract: Non-governmental organizations (NGOs) are exerting growing pressure on firms to eliminate product components (such as palm oil) that are harmful to the environment (such as rainforests) or replace such components with NGO-certified sustainable components. Under which conditions does NGO pressure lead firms to eliminate basic components from their products or, alternatively, substitute damaging components with certified sustainable components? What are the ensuing effects on market structure, environmental quality, and social welfare? The paper addresses these issues using a model of two-dimensional vertical product differentiation. It shows that, for an NGO that collects certification fees to accrue its budget and finance its awareness campaign, it may — paradoxically — be optimal to reduce the certified product’s market share and eventually evict it.

Keywords: NGO; eco-label; environmental quality; product differentiation; palm oil; biofuels (search for similar items in EconPapers)
JEL-codes: D11 D62 D83 L15 Q58 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-env and nep-ind
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Related works:
Working Paper: The market for "harmful-component-free" products under pressure from the NGOs (2020)
Working Paper: The market for "harmful component-free" products under pressure from the NGOs (2020)
Working Paper: The market for "harmful component-free" products under pressure from the NGOs (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8389

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