Credence Goods, Efficient Labelling Policies, and Regulatory Enforcement
We analyse the optimality of information revelation of hidden attributes of “credence goods” via alternative labelling procedures. When consumers are heterogeneous in their willingness to pay for the hidden attribute, producers can either self-label their products, or have them certified by a third party. The government can impose self or third party labelling requirements on either the “green” or the “brown” producers. Our benchmark model develops a condition that links the optimal imposition of third party labelling to the relative market share of each type of the good under complete information. We extend our analysis to incorporate asymmetric information and cheating by the producers. When corrupt producers can affix spurious labels, the government needs to supplement the labelling policy with costly monitoring activities. We find that mandatory self-labelling schemes generally dominate mandatory third party labelling, unless the “market share effect” greatly exceeds the “incentive-to-cheat effect”. Copyright Springer Science+Business Media, Inc. 2007
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 37 (2007)
Issue (Month): 2 (June)
|Contact details of provider:|| Web page: http://www.springer.com|
Postal:c/o EAERE Secretariat - Fondazione Eni Enrico Mattei - Isola di San Giorgio Maggiore 8, I-30124 Venice, Italy
Web page: http://www.eaere.org/
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/environmental/journal/10640/PS2|
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.:
- Tom Tietenberg, 1998. "Disclosure Strategies for Pollution Control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 11(3), pages 587-602, April.
- Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December.
- Heyes, Anthony G. & Maxwell, John W., 2004.
"Private vs. public regulation: political economy of the international environment,"
Journal of Environmental Economics and Management,
Elsevier, vol. 48(2), pages 978-996, September.
- Anthony Heyes and John Maxwell, 2003. "Private vs. Public Regulation: Political Economy of the International Environment," Royal Holloway, University of London: Discussion Papers in Economics 03/5, Department of Economics, Royal Holloway University of London, revised Dec 2003.
- Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Kirchhoff, Stefanie & Zago, Angelo M., 2001. "A Simple Model Of Voluntary Vs Mandatory Labelling Of Gmos," 2001 Annual meeting, August 5-8, Chicago, IL 20540, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Grieson, Ronald E. & Singh, Nirvikar, 1990. "Regulating externalities through testing," Journal of Public Economics, Elsevier, vol. 41(3), pages 369-387, April.
- Mads Greaker, 2006. "Eco-labels, Trade and Protectionism," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 33(1), pages 1-37, 01.
- Sedjo, Roger & Swallow, Stephen, 1999. "Eco-Labeling and the Price Premium," Discussion Papers dp-00-04, Resources For the Future.
- Stefanie Kirchhoff, 2000. "Green Business and Blue Angels," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(4), pages 403-420, April.
- Amacher, Gregory S. & Koskela, Erkki & Ollikainen, Markku, 2004. "Environmental quality competition and eco-labeling," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 284-306, March.
- Stephen K. Swallow & Roger A. Sedjo, 2000. "Eco-Labeling Consequences in General Equilibrium: A Graphical Assessment," Land Economics, University of Wisconsin Press, vol. 76(1), pages 28-36.
When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:37:y:2007:i:2:p:411-430. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.