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Can ecolabeling schemes preserve the environment?

Author

Listed:
  • Lisette Ibanez

    () (LEF - Laboratoire d'Economie Forestière - INRA - Institut National de la Recherche Agronomique - AgroParisTech)

  • Gilles Grolleau

    () (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UM3 - Université Paul-Valéry - Montpellier 3 - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)

Abstract

A three-stage game of production technology, signal and price competition is developed to study the impact of eco-labeling, in a duopoly model of vertical product differentiation. The production technology and the subsequent pollution level are non-observable by consumers. The only way to inform consumers about the environmental quality of the product is to stick an ecolabel on it. However, a polluting firm may also usurp the ecolabel by incurring a certain cost. By assuming that consumers are altruistic and willing to pay for environmental quality, we show that ecolabels can reduce the pollution level. Finally and importantly, under restrictive conditions on labeling cost, ecolabeling can constitute to some extent an environmentally effective and economically efficient policy. However, ecolabeling cannot alone internalize the whole negative externality until the optimum point.

Suggested Citation

  • Lisette Ibanez & Gilles Grolleau, 2008. "Can ecolabeling schemes preserve the environment?," Post-Print hal-01072438, HAL.
  • Handle: RePEc:hal:journl:hal-01072438
    DOI: 10.1007/s10640-007-9150-3
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01072438
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    References listed on IDEAS

    as
    1. 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.
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    More about this item

    Keywords

    ALTRUISME; ECOLABEL; DUOPOLE; ALTRUISM; DUOPOLY; ENVIRONMENTAL POLICY;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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