Industrialists hand in hand with environmentalists: how eco-labeling schemes can help firms to raise rivals' costs

Gilles Grolleau (), Lisette Ibanez and Naoufel Mzoughi

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Abstract: Industrialists may promote eco-labeling schemes in order to gain the support of environmentalists and ultimately gain market protection. Beyond the environmental effects of such coalitions, these schemes can provide industrialists a legitimate way to disadvantage rivals, frequently foreign rivals, by raising their costs. We consider a Stackelberg model that determines the conditions under which a domestic firm has incentive to impose an eco-label in order to raise the costs of its foreign rivals. The effects of eco-labeling on domestic social welfare are ambiguous. Policy recommendations are drawn. Notably, factors that may help policy makers to identify situations more vulnerable to undesirable outcomes from a welfare viewpoint are developed.

Keywords: ECO-LABEL; ENVIRONMENTAL PROTECTIONISM; RAISING RIVALS' COST; INDUSTRIE (search for similar items in EconPapers)
Date: 2007
Note: View the original document on HAL open archive server: https://hal.science/hal-01072408v1
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Citations: View citations in EconPapers (7)

Published in European Journal of Law and Economics, 2007, 24 (3), pp.215-236. ⟨10.1007/s10657-007-9034-6⟩

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Journal Article: Industrialists hand in hand with environmentalists: how eco-labeling schemes can help firms to raise rivals’ costs (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01072408

DOI: 10.1007/s10657-007-9034-6

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