Can ecolabeling schemes preserve the environment?

Lisette Ibanez and Gilles Grolleau ()

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Abstract: A three-stage game of production technology, signal and price competition is developed to study the impact of eco-labeling, in a duopoly model of vertical product differentiation. The production technology and the subsequent pollution level are non-observable by consumers. The only way to inform consumers about the environmental quality of the product is to stick an ecolabel on it. However, a polluting firm may also usurp the ecolabel by incurring a certain cost. By assuming that consumers are altruistic and willing to pay for environmental quality, we show that ecolabels can reduce the pollution level. Finally and importantly, under restrictive conditions on labeling cost, ecolabeling can constitute to some extent an environmentally effective and economically efficient policy. However, ecolabeling cannot alone internalize the whole negative externality until the optimum point.

Keywords: ALTRUISME; ECOLABEL; DUOPOLE; ALTRUISM; DUOPOLY; ENVIRONMENTAL POLICY (search for similar items in EconPapers)
Date: 2008
Note: View the original document on HAL open archive server: https://hal.science/hal-01072438v1
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Citations: View citations in EconPapers (56)

Published in Environmental and Resource Economics, 2008, 40 (2), pp.233-249. ⟨10.1007/s10640-007-9150-3⟩

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Journal Article: Can Ecolabeling Schemes Preserve the Environment? (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01072438

DOI: 10.1007/s10640-007-9150-3

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