The Economics of Green Labels
AbstractPollution is a public bad. In neoclassical models, when economic agents face environmental externalities, individual rationality is not sufficient to create optimality. By supposing that consumers have an altruistic behavior, we reduce the non-optimality range and we find that a monopoly is socially more efficient with respect of the environment than a duopoly. When consumers do not perfectly distinguish the environmental characteristics of products, producers can adopt a green label to signal their "environmental friendly" output. But polluting firms can be induced to free-ride them. The paper analyzes various perfect Bayesian equilibria reflecting these behaviors.
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Bibliographic InfoPaper provided by Toulouse - GREMAQ in its series Papers with number 96.439.
Length: 27 pages
Date of creation: 1996
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Find related papers by JEL classification:
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
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- José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
- Auriol, Emmanuelle & Schilizzi, Steven, 2003. "Quality Signaling through Certification. Theory and an Application to Agricultural Seed Market," IDEI Working Papers 165, Institut d'Économie Industrielle (IDEI), Toulouse.
- Lisette Ibanez & Gilles Grolleau, 2008. "Can Ecolabeling Schemes Preserve the Environment?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(2), pages 233-249, June.
- Kuhn, Michael, 1999. "Green Lemons - Environmental Labels and Entry into an Environmentally Differentiated Market under Asymmetric Information," Thuenen-Series of Applied Economic Theory 20, University of Rostock, Institute of Economics.
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