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Labelling by a for-Profit Certifier

Author

Listed:
  • Ibrahima BARRY

    ()

  • Olivier BONROY

    ()

  • Paolo G. GARELLA

    ()

Abstract

We analyze a for-profit certifier’s eco-labelling policies in industries where firms have some “countervailing power”. We show that the certification standard for an environmental quality is lowered when firms bargain over the certification fee. This result is explained by the firms obtaining a positive profit when they do not adopt the label (an outside option). Without “countervailing power” the certifier would be able to extract the whole surplus from the labeling firm and would set a higher standard for the environmental quality. Taxes and subsidies aimed to increase the latter also affect the fee and the standard; the final effect of these policies may be shown to be reversed by the “countervailing power”.

Suggested Citation

  • Ibrahima BARRY & Olivier BONROY & Paolo G. GARELLA, 2014. "Labelling by a for-Profit Certifier," Departmental Working Papers 2014-07, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano, revised 27 Feb 2016.
  • Handle: RePEc:mil:wpdepa:2014-07
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    File URL: http://wp.demm.unimi.it/files/wp/2014/DEMM-2014_07wp.pdf
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    References listed on IDEAS

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    Cited by:

    1. Olivier Bonroy & Christos Constantatos, 2015. "On the Economics of Labels: How Their Introduction Affects the Functioning of Markets and the Welfare of All Participants," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 239-259.

    More about this item

    Keywords

    Labels; private certification; public certification; tax; subsidy;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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