Wasteful Labeling

Philippe Mahenc

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Abstract: The role of labeling is to solve the adverse selection problem caused by unsubstantiated claims from …rms. The problem however is likely to remain unsolved if the labeling agency is not trustworthy. She can be suspected to divert the fees charged for labeling from their primary purpose of collecting information in order to raise excessive revenue. This paper addresses this issue and shows that labeling may be wasteful due to consumers'scepticism about the trustworthiness of labeling. To award …rms green labels, the agency may charge fees that exceed the Ramsey level at which the revenue needed for collecting information is raised with a minimal loss in terms of e¢ ciency.

Keywords: Greenwashing; Labeling; Signaling (search for similar items in EconPapers)
Date: 2009
Note: View the original document on HAL open archive server: https://hal.science/hal-02081034v1
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Citations: View citations in EconPapers (1)

Published in Journal of Agricultural and Food Industrial Organization, 2009

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Journal Article: Wasteful Labeling (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02081034

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