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But What Does it Mean? Competition between Products Carrying Alternative Green Labels when Consumers are Active Acquirers of Information

Author

Listed:
  • Anthony Heyes

    (University of Ottawa)

  • Sandeep Kapur

    (Birkbeck, University of London)

  • Peter W. Kennedy

    (University of Victoria)

  • Steve Martin

    (Statistics Canada)

  • John W. Maxwell

    (Indiana University)

Abstract

Programs that certify the environmental (or other social) attributes of firms are common.But the proliferation of labeling schemes makes it difficult for consumers to know what each one mean – what level of `greenness' does a particular label imply? We provide the first model in which consumers can expend effort to learn what labels mean. The relationship between information acquisition costs, firm pricing decisions, the market shares obtained by alternatively-labeled goods and a brown `backstop' good, and total environmental impact prove complex.Consumer informedness can have perverse implications. In plausible cases a reduction in the cost of information damages environmental outcomes. Our results challenge the presumption that provision of environmental information to the public is necessarily good for welfare or the environment.

Suggested Citation

  • Anthony Heyes & Sandeep Kapur & Peter W. Kennedy & Steve Martin & John W. Maxwell, 2018. "But What Does it Mean? Competition between Products Carrying Alternative Green Labels when Consumers are Active Acquirers of Information," Birkbeck Working Papers in Economics and Finance 1812, Birkbeck, Department of Economics, Mathematics & Statistics.
  • Handle: RePEc:bbk:bbkefp:1812
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    File URL: http://eprints.bbk.ac.uk/id/eprint/25404
    File Function: First version, 2018
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Eco-labeling; green consumerism; information-based instruments.;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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