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The Economics of Green Labels

Author

Listed:
  • Crampes,C.
  • Ibanez,L.

Abstract

Pollution is a public bad. In neoclassical models, when economic agents face environmental externalities, individual rationality is not sufficient to create optimality. By supposing that consumers have an altruistic behavior, we reduce the non-optimality range and we find that a monopoly is socially more efficient with respect of the environment than a duopoly. When consumers do not perfectly distinguish the environmental characteristics of products, producers can adopt a green label to signal their "environmental friendly" output. But polluting firms can be induced to free-ride them. The paper analyzes various perfect Bayesian equilibria reflecting these behaviors.

Suggested Citation

  • Crampes,C. & Ibanez,L., 1996. "The Economics of Green Labels," Papers 96.439, Toulouse - GREMAQ.
    • Handle: RePEc:fth:gremaq:96.439
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    Citations

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    Cited by:

    1. Lisette Ibanez & Gilles Grolleau, 2008. "Can Ecolabeling Schemes Preserve the Environment?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(2), pages 233-249, June.
    2. Kuhn, Michael, 1999. "Green Lemons - Environmental Labels and Entry into an Environmentally Differentiated Market under Asymmetric Information," Thuenen-Series of Applied Economic Theory 20, University of Rostock, Institute of Economics.
    3. José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.

    More about this item

    Keywords

    SOCIAL WELFARE;

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other

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