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Wasteful Labeling

Author

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  • Mahenc Philippe

    (Toulouse School of Economics (LERNA-INRA))

Abstract

The role of labeling is to solve the adverse selection problem caused by unsubstantiated claims from firms. The problem however is likely to remain unsolved if the labeling agency is not trustworthy. The agency 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 if the agency is likely to be untrustworthy. To award firms 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 efficiency.

Suggested Citation

  • Mahenc Philippe, 2009. "Wasteful Labeling," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 7(2), pages 1-20, December.
  • Handle: RePEc:bpj:bjafio:v:7:y:2009:i:2:n:6
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    Citations

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    Cited by:

    1. Brécard, Dorothée, 2014. "Consumer confusion over the profusion of eco-labels: Lessons from a double differentiation model," Resource and Energy Economics, Elsevier, vol. 37(C), pages 64-84.
    2. repec:bla:jemstr:v:26:y:2017:i:2:p:454-483 is not listed on IDEAS
    3. Pio Baake & Helene Naegele, 2017. "Competition between For-Profit and Industry Labels: The Case of Social Labels in the Coffee Market," Discussion Papers of DIW Berlin 1686, DIW Berlin, German Institute for Economic Research.
    4. Hattori, Keisuke & Higashida, Keisaku, 2014. "Misleading advertising and minimum quality standards," Information Economics and Policy, Elsevier, vol. 28(C), pages 1-14.
    5. Olivier Bonroy & Christos Constantatos, 2015. "On the Economics of Labels: How Their Introduction Affects the Functioning of Markets and the Welfare of All Participants," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 239-259.
    6. Philippe Mahenc, 2017. "Honest versus Misleading Certification," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 454-483, June.
    7. repec:gbl:wpaper:2013-01 is not listed on IDEAS
    8. Mireille Chiroleu-Assouline, 2016. "Multiple Standards: the Case of the French Building Industry," Policy Papers 2016.08, FAERE - French Association of Environmental and Resource Economists.

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