Welfare Effects Of Eco-Label Proliferation: Too Much Of A Good Thing?
Given that existing food eco-labels are still not well defined in consumers' experience, there is potential for new labels to generate more confusion. Consumers incur fixed costs to learn about a label's meaning. Market shares for existing certifications may be eroded by perceptions that new products are good substitutes for them. The eco-label certifier must respond with information that reduces these costs or lose consumer and producer confidence in the label. Using a model of spatial competition in attribute space, the effect of search costs and educational expenditures on market share and price for competing certifiers is simulated. The results show that educational spending and/or improvements in efficiency of educational spending increase market share when consumer search costs are positive. Underspending on consumer education reduces the price a firm is able to charge within its market niche. The consumer and producer surplus effects of new certifier entry are calculated using a simulation model of market segmentation. Under the assumptions made, segmentation reduces producer surplus while keeping consumer surplus about the same. Market prices decline due to associated search costs as share is captured from the conventional segment by eco-labels. Within segments, consumers gain at the expense of producers, even if market share is maintained by existing eco-labelers after entry of new labels, and even if consumer search costs decline.
|Date of creation:||1998|
|Contact details of provider:|| Postal: Conner Hall, Athens, GA 30602|
Phone: (706) 542-2481
Fax: (706) 542-0739
Web page: http://www.caes.uga.edu/departments/agecon/index.html
More information through EDIRC
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.:
- Loren W. Tauer, 1994.
"The value of segmenting the milk market into bST-Produced and Non-bST-Produced milk,"
John Wiley & Sons, Ltd., vol. 10(1), pages 3-12.
- Tauer, Loren W., 1992. "The Value of Segmenting the Milk Market into bST-Produced and Non-bST-Produced Milk," Working Papers 128119, Cornell University, Department of Applied Economics and Management.
- Park, Timothy A. & Florkowski, Wojciech J., 1999. "Demand and Quality Uncertainty in Pecan Purchasing Decisions," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 31(01), pages 29-39, April.
- Park, Timothy A. & Florkowski, Wojciech J., 1999. "Demand And Quality Uncertainty In Pecan Purchasing Decisions," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(01), April.
- Timothy PARK & Wojciech J. FLORKOWSKI, 1996. "Demand And Quality Uncertainty In Pecan Purchasing Decisions," Faculty Series 96-22, University of Georgia, Department of Agricultural and Applied Economics.
- Park, Timothy A. & Florkowski, Wojciech J., 1996. "Demand And Quality Uncertainty In Pecan Purchasing Decisions," Faculty Series 16714, University of Georgia, Department of Agricultural and Applied Economics.
- Beath,John & Katsoulacos,Yannis, 1991. "The Economic Theory of Product Differentiation," Cambridge Books, Cambridge University Press, number 9780521335263, December.
- Beath,John & Katsoulacos,Yannis, 1991. "The Economic Theory of Product Differentiation," Cambridge Books, Cambridge University Press, number 9780521335522, December.
- Landon, Stuart & Smith, Constance, 1997. "The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine," MPRA Paper 9283, University Library of Munich, Germany.
- Bruce L. Benson & Merle D. Faminow, 1985. "An Alternative View of Pricing in Retail Food Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(2), pages 296-306. Full references (including those not matched with items on IDEAS)