Green Business and Blue Angels
AbstractThis paper presents a model of a monopolist'svoluntary overcompliance with legal environmentalstandards under asymmetric information about thefirm's environmental impacts. The key assumptions are:the existence of quality premia for environmentalsoundness, a positive but imperfect degree ofmonitoring, and adaptive consumer expectations.Conditions necessary for overcompliance to arise in aprofit-maximizing equilibrium are derived. The effectsof a third-party eco-labeling system are analyzed. Itis shown that the existence of an independent labelingauthority increases the likelihood of overcomplianceto be profit-maximizing. Moreover, firms might have anincentive to lobby for the introduction of such asystem. The effect of consumers' risk preferences andan instrument for preventing ``Greenwash'' (companieslying about their environmental performance) is alsodiscussed. Copyright Kluwer Academic Publishers 2000
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Bibliographic InfoArticle provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.
Volume (Year): 15 (2000)
Issue (Month): 4 (April)
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Web page: http://www.springerlink.com/link.asp?id=100263
asymmetric information; eco-labeling; environmental friendliness;
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