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Environmental Certification, Consumer Greenness, and Greenwashing

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  • Theresa Wittreich

Abstract

This paper investigates the welfare effects of imperfect environmental certification and its efficacy as an environmental policy tool within a partially covered product market and price competition among firms. Using a game‐theoretic model, I find that a truth‐revealing certification mechanism – that emerges for a sufficiently precise certification mechanism or high certification fee – can enhance welfare while consistently outperforming a pooling mechanism. While greenwashing cannot benefit the economy in price competition, it may have different implications in quantity competition. The study highlights that a truth‐revealing certification mechanism is crucial for effectively reducing environmental damage, offering valuable insights for policymakers.

Suggested Citation

  • Theresa Wittreich, 2025. "Environmental Certification, Consumer Greenness, and Greenwashing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(4), pages 2289-2313, June.
    • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:4:p:2289-2313
    DOI: 10.1002/mde.4452
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    References listed on IDEAS

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