Monitoring Eco-Labels: You Can Have Too Much of a Good Thing

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Monitoring Eco-Labels: You Can Have Too Much of a Good Thing

Author Info

Thomas Liebi

Abstract

An increasing number of product labels is making environmental claims. Typically, these claims are non-verifiable to consumers, they represent a credence attribute of the product. The usual way to handle this problem is external monitoring of such labels. We consider a model where firms in a competitive market choose product quality and the intensity of monitoring. It is shown that all the firms producing the high quality credence good will choose the same level of monitoring, i.e., an industry standard will evolve. However, in a competitive equilibrium there will be more monitoring than is socially desirable.

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Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0207.

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Date of creation: Jul 2002
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Handle: RePEc:ube:dpvwib:dp0207

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Find related papers by JEL classification:
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-09-11 (All new papers)
NEP-EEC-2002-09-11 (European Economics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Andersson, Fredrik, 2002. "Pooling reputations," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 715-730, May. [Downloadable!] (restricted)
Choi, Jay Pil, 1998. "Brand Extension as Informational Leverage," Review of Economic Studies, Blackwell Publishing, vol. 65(4), pages 655-69, October. [Downloadable!] (restricted)
Other versions:
- Pil Choi, J., 1997. "Brand Extension as Informational Leverage," Papers 451, Osaka - Institute of Social and Economic Research.
Winand Emons, 1994. "Credence Goods and Fraudulent Experts," Diskussionsschriften dp9402, Universitaet Bern, Departement Volkswirtschaft.
Other versions:
- Winand Emons, 1997. "Credence Goods and Fraudelent Experts," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 107-119, Spring. [Downloadable!] (restricted)
Cabral, L.M.B., 2000. "Stretching Firm and Brand Reputation," New York University, Leonard N. Stern School Finance Department Working Paper Seires 00-07, New York University, Leonard N. Stern School of Business-.
Other versions:
- Luis Cabral, 2000. "Stretching Firm and Brand Reputation," Working Papers 00-07, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
- Luis M.B. Cabral, 2000. "Stretching Firm and Brand Reputation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 658-673, Winter.
Thomas Liebi, 2002. "Trusting Labels: A Matter of Numbers?," Diskussionsschriften dp0201, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
Telser, L G, 1980. "A Theory of Self-enforcing Agreements," Journal of Business, University of Chicago Press, vol. 53(1), pages 27-44, January. [Downloadable!] (restricted)
Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August. [Downloadable!] (restricted)
Emons, Winand, 2001. "Credence goods monopolists," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 375-389, March. [Downloadable!] (restricted)
Other versions:
- Winand Emons, 1995. "Credence Goods Monopolists," Diskussionsschriften dp9501, Universitaet Bern, Departement Volkswirtschaft.
- Winand Emons, 1997. "Credence Goods Monopolists," Berkeley Olin Program in Law & Economics, Working Paper Series 1060, Berkeley Olin Program in Law & Economics. [Downloadable!]

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Thomas Liebi, 2003. "The Demand for Tests," Diskussionsschriften dp0307, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]

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