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Eco-labelling, Competition and Environment: Endogenization of Labelling Criteria

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  • Adel Ben Youssef

    ()

  • Rim Lahmandi-Ayed

    ()

Abstract

This paper suggests a modelling of the labelling procedure consistent with empirical observations, that allows the endogenous calculation of labelling criteria. The authority in charge of the labelling program chooses the level of labelling criteria so as to maximise the social surplus, anticipating competition between firms in environmental qualities and prices. While accounting simply for the informational role of labels, this model allows to understand observed behavior such as firms' ignorance of a label, resistance, support or indifference of firms to the labelling program and the decision of the authority not to set up a label.
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Suggested Citation

  • Adel Ben Youssef & Rim Lahmandi-Ayed, 2008. "Eco-labelling, Competition and Environment: Endogenization of Labelling Criteria," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(2), pages 133-154, October.
  • Handle: RePEc:kap:enreec:v:41:y:2008:i:2:p:133-154
    DOI: 10.1007/s10640-007-9184-6
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    References listed on IDEAS

    as
    1. Cason, Timothy N. & Gangadharan, Lata, 2002. "Environmental Labeling and Incomplete Consumer Information in Laboratory Markets," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 113-134, January.
    2. Cesare Dosi & Michele Moretto, 2001. "Is Ecolabelling a Reliable Environmental Policy Measure?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 18(1), pages 113-127, January.
    3. Roe, Brian & Teisl, Mario F. & Levy, Alan & Russell, Matthew, 2001. "US consumers' willingness to pay for green electricity," Energy Policy, Elsevier, vol. 29(11), pages 917-925, September.
    4. 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.
    5. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
    6. 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.
    7. Bjorner, Thomas Bue & Hansen, L.G.Lars Garn & Russell, Clifford S., 2004. "Environmental labeling and consumers' choice--an empirical analysis of the effect of the Nordic Swan," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 411-434, May.
    8. Lahmandi-Ayed, Rim, 2000. "Natural Oligopolies: A Vertical Differentiation Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 971-987, November.
    9. Ibanez, Lisette & Stenger, Anne, 2000. "Environment and Food Safety in Agriculture: Are Labels Efficient?," Australian Economic Papers, Wiley Blackwell, vol. 39(4), pages 452-464, December.
    10. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
    11. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    12. Mattoo, Aaditya & Singh, Harsha V, 1994. "Eco-labelling: Policy Considerations," Kyklos, Wiley Blackwell, vol. 47(1), pages 53-65.
    13. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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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:kap:regeco:v:52:y:2017:i:3:d:10.1007_s11149-017-9339-5 is not listed on IDEAS
    3. Ben Youssef Adel & Abderrazak Chema, 2009. "Multiplicity of Eco-Labels, Competition, and the Environment," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 7(2), pages 1-24, December.
    4. Brécard Dorothée & Lucas Sterenn & Pichot Nathalie & Salladarré Frédéric, 2012. "Consumer Preferences for Eco, Health and Fair Trade Labels. An Application to Seafood Product in France," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 10(1), pages 1-32, April.
    5. Dorothée Brécard, 2017. "Consumer misperception of eco-labels, green market structure and welfare," Journal of Regulatory Economics, Springer, vol. 51(3), pages 340-364, June.
    6. Ghazzai Hend & Lahmandi-Ayed Rim, 2009. "Vertical Differentiation, Social Networks and Compatibility Decisions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-23, June.
    7. Li, Yi, 2016. "Competing eco-labels and product market competition," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235389, Agricultural and Applied Economics Association.
    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.

    More about this item

    Keywords

    Eco-label; Labelling criteria; Environmental quality; Price competition; Firms’ position; C72; L13; Q20;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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