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The Economics of Green Labels

Claude Crampes () and Lisette Ibanez ()

Working Papers from Toulouse - GREMAQ

Abstract: Pollution is a public bad. In neoclassical models, when economic agents face environmental externalities, individual rationality is not sufficient to create optimality. By supposing that consumers have an altruistic behavior, we reduce the non-optimality range and we find that a monopoly is socially more efficient with respect of the environment than a duopoly. When consumers do not perfectly distinguish the environmental characteristics of products, producers can adopt a green label to signal their "environmental friendly" output. But polluting firms can be induced to free-ride them. The paper analyzes various perfect Bayesian equilibria reflecting these behaviors.

Keywords: SOCIAL; WELFARE (search for similar items in EconPapers)
JEL-codes: D64 L19 (search for similar items in EconPapers)
Pages: 27 pages
Date: 1996
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