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Ecolabels: Is More Information Better?

Hend Ghazzai () and Rim Lahmandi-Ayed ()
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Hend Ghazzai: UR MASE - Modélisation et Analyse Statistique et Economique - ESSAIT - Ecole Supérieure de la Statistique et de l'Analyse de l'Information - Université de Carthage - University of Carthage

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Abstract: We study in this paper the effect of the type of information provided by an ecolabel. For this purpose, in the framework of a model of vertical differentiation, we compare the effects of a partial information label (Type I) and a complete information label (Type III) on firms' profits, industry profit, consumers' surplus, environmental damage and social welfare. A partial information label indicates that the environmental quality of a good exceeds some given threshold. The authority issuing a partial information label chooses its labeling criteria while maximizing the social welfare. A complete information label indicates the exact environmental quality chosen by firms. We prove that while a partial information label always improves the social welfare and deteriorates the green firm profit compared to a complete information label, the preferences of the brown firm, the industry, the consumers and the impact on the environment depend on the marginal cost of quality and on the environmental sensitivity to quality.

Keywords: Ecolabel; Complete Information; Partial Information; Environmental Quality; Ver-tical Differentiation JEL Classification L11; Q58 (search for similar items in EconPapers)
Date: 2018-09-20
New Economics Papers: this item is included in nep-env
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