Green Business and Blue Angels
This 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
Volume (Year): 15 (2000)
Issue (Month): 4 (April)
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- Tomer, John F., 1992. "The human firm in the natural environment: a socio-economic analysis of its behavior," Ecological Economics, Elsevier, vol. 6(2), pages 119-138, October. Full references (including those not matched with items on IDEAS)
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