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The economics of eco-labeling: Standards, costs and prices

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  • Yenipazarli, Arda

Abstract

The existing eco-label landscape is fragmented because of the presence of numerous labels with different standards and is a pre-competitive environment for firms to play in with many unanswered questions. Different standards – eco-labels are built around – have different effects on credibility and legitimacy, costs and benefits, and ability to achieve sustainability goals of eco-labeling. Focusing on eco-label standards and using a Hotelling-type horizontal differentiation model, we identify standards-specific issues for and characterize primary barriers to eco-labeling. Some of the major findings are as follows: (1) More rigorous environmental standards enforced by higher-integrity labels do not necessarily translate into higher selling prices; (2) Higher prices commanded by labeled products do not guarantee that a firm will derive higher profits from eco-labeling; (3) Auditing fees paid per product unit being inspected for ensuring compliance with an eco-label standard (rather than participation fees paid up front) is the primary de facto barrier to business involvement in eco-labeling; and (4) Customers׳ willingness to pay price premiums for eco-labeled products is not a sufficient condition to generate a premium in the market.

Suggested Citation

  • Yenipazarli, Arda, 2015. "The economics of eco-labeling: Standards, costs and prices," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 275-286.
  • Handle: RePEc:eee:proeco:v:170:y:2015:i:pa:p:275-286
    DOI: 10.1016/j.ijpe.2015.09.032
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    3. Jie Jin & Qiuhong Zhao & Ernesto DR Santibanez-Gonzalez, 2019. "How Chinese Consumers’ Intentions for Purchasing Eco-Labeled Products Are Influenced by Psychological Factors," IJERPH, MDPI, vol. 17(1), pages 1-17, December.
    4. Morone, Piergiuseppe & Caferra, Rocco & D'Adamo, Idiano & Falcone, Pasquale Marcello & Imbert, Enrica & Morone, Andrea, 2021. "Consumer willingness to pay for bio-based products: Do certifications matter?," International Journal of Production Economics, Elsevier, vol. 240(C).
    5. Yeboah, Samuel, 2023. "Navigating Sustainability: Unveiling Responsible Consumption and Production in Developing Economies for SDG 12 Achievement," MPRA Paper 118214, University Library of Munich, Germany, revised 25 Jul 2023.
    6. Daniel Berki-Kiss & Klaus Menrad, 2019. "Consumer Preferences of Sustainability Labeled Cut Roses in Germany," Sustainability, MDPI, vol. 11(12), pages 1-19, June.
    7. Ren, Shenggang & He, Duojun & Yan, Ji & Zeng, Huixiang & Tan, Justin, 2022. "Environmental labeling certification and corporate environmental innovation: The moderating role of corporate ownership and local government intervention," Journal of Business Research, Elsevier, vol. 140(C), pages 556-571.

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