IDEAS home Printed from https://ideas.repec.org/p/zbw/bamber/319884.html

Awards vs. labels: Incentivizing investments in environmental quality

Author

Listed:
  • Heidelmeier, Lisa
  • Schmitt, Stefanie Y.

Abstract

Although consumers often care about environmental quality, limited attention impairs consumers' perception of environmental quality. Environmental awards and labels make environmental quality salient and attract consumers' attention. We analyze how awards and labels affect firms' investments in environmental quality and social welfare. We show that, with an award, both firms invest in environmental quality; with a label, only one firm invests. Under awards, investments depend positively on salience. Under labels, investments depend non-monotonically on salience. A welfare-maximizing social planner prefers awards over labels if and only if marginal damage and salience are sufficiently high such that consumers overestimate the environmental quality of the goods.

Suggested Citation

  • Heidelmeier, Lisa & Schmitt, Stefanie Y., 2025. "Awards vs. labels: Incentivizing investments in environmental quality," BERG Working Paper Series 206, Bamberg University, Bamberg Economic Research Group.
    • Handle: RePEc:zbw:bamber:319884
    DOI: 10.20378/irb-108375
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/319884.2/1/berg-wp206.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.20378/irb-108375?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mark A. Andor & Andreas Gerster & Kenneth T. Gillingham & Marco Horvath, 2020. "Running a car costs much more than people think — stalling the uptake of green travel," Nature, Nature, vol. 580(7804), pages 453-455, April.
    2. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
    3. Boogen, Nina & Daminato, Claudio & Filippini, Massimo & Obrist, Adrian, 2022. "Can information about energy costs affect consumers’ choices? Evidence from a field experiment☆," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 568-588.
    4. Rodolfo Sejas-Portillo & Mirko Moro & Till Stowasser, 2025. "The Simpler the Better? Threshold Effects of Energy Labels on Property Prices and Energy Efficiency Investments," American Economic Journal: Applied Economics, American Economic Association, vol. 17(1), pages 41-89, January.
    5. Olivier Bos & Béatrice Roussillon & Paul Schweinzer, 2016. "Agreeing on Efficient Emissions Reduction," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(4), pages 785-815, October.
    6. 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.
    7. Carolyn Fischer & Thomas P. Lyon, 2019. "A Theory of Multitier Ecolabel Competition," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(3), pages 461-501.
    8. Björn Bartling & Vanessa Valero & Roberto A. Weber, 2018. "The causal effect of income on market social responsibility," ECON - Working Papers 299, Department of Economics - University of Zurich, revised Aug 2024.
    9. Daan Hulshof & Machiel Mulder, 2020. "Willingness to Pay for $$\hbox {CO}_2$$CO2 Emission Reductions in Passenger Car Transport," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 899-929, April.
    10. Steven Sexton, 2015. "Automatic Bill Payment and Salience Effects: Evidence from Electricity Consumption," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 229-241, May.
    11. Anthony Heyes & Sandeep Kapur & Peter W. Kennedy & Steve Martin & John W. Maxwell, 2020. "But What Does It Mean? Competition between Products Carrying Alternative Green Labels When Consumers Are Active Acquirers of Information," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(2), pages 243-277.
    12. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Heidelmeier, Lisa & Sahm, Marco, 2025. "Environmental awards in a duopoly with green consumers," BERG Working Paper Series 207, Bamberg University, Bamberg Economic Research Group.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heidelmeier, Lisa & Sahm, Marco, 2025. "Environmental awards in a duopoly with green consumers," BERG Working Paper Series 207, Bamberg University, Bamberg Economic Research Group.
    2. Lisa Heidelmeier & Marco Sahm, 2025. "Environmental Awards in a Duopoly with Green Consumers," CESifo Working Paper Series 11879, CESifo.
    3. Schmitt, Stefanie Y., 2025. "Investments in environmental quality under limited attention," BERG Working Paper Series 202, Bamberg University, Bamberg Economic Research Group.
    4. Stephan Eitel & Stefanie Y. Schmitt, 2026. "Fighting over Environmental Salience," Working Papers 247, Bavarian Graduate Program in Economics (BGPE).
    5. repec:osf:socarx:ay8rq_v1 is not listed on IDEAS
    6. Haitao CHENG & Jota ISHIKAWA & Nori TARUI, 2025. "Green Consumption and Corporate Environmental Responsibility in North-South Trade," Discussion papers 25043, Research Institute of Economy, Trade and Industry (RIETI).
    7. Delmas, Magali A. & Gergaud, Olivier, 2021. "Sustainable practices and product quality: Is there value in eco-label certification? The case of wine," Ecological Economics, Elsevier, vol. 183(C).
    8. Keisuke Hattori & Keisaku Higashida, 2023. "Who should be regulated: Genuine producers or third parties?," Journal of Economics, Springer, vol. 138(3), pages 249-286, April.
    9. Heidelmeier, Lisa & Sahm, Marco, 2023. "A Vertically Differentiated Duopoly Model with Environmental Awards," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277635, Verein für Socialpolitik / German Economic Association.
    10. Li, Yi, 2020. "Competing eco-labels and product market competition," Resource and Energy Economics, Elsevier, vol. 60(C).
    11. Fritz, Qi Gao, 2023. "Label to match - Firms’ signaling decisions when not everyone cares," SocArXiv ay8rq, Center for Open Science.
    12. 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.
    13. Hend Ghazzai & R Lahmandi-Ayed, 2018. "Ecolabels: Is More Information Better?," Working Papers hal-01877934, HAL.
    14. Cole, Matthew T. & Doremus, Jacqueline M. & Hamilton, Stephen F., 2021. "Import restrictions by eco-certification: Quantity effects on tropical timber production," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    15. Aditi Sengupta, 2024. "Communicating clean technology: Green premium, competition, and ecolabels," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 33(3), pages 605-629, August.
    16. Ana Espinola-Arredondo & Felix Munoz-Garcia, 2012. "An Excessive Development of Green Products," Working Papers 2012-5, School of Economic Sciences, Washington State University.
    17. Gilles Grolleau & Lisette Ibanez & Naoufel Mzoughi & Mario Teisl, 2016. "Helping eco-labels to fulfil their promises," Climate Policy, Taylor & Francis Journals, vol. 16(6), pages 792-802, August.
    18. Jibonayan Raychaudhuri & Ada Wossink, 2023. "Ecolabels and the economic recession," PLOS ONE, Public Library of Science, vol. 18(12), pages 1-27, December.
    19. Li, Yuanhao & van 't Veld, Klaas, 2015. "Green, greener, greenest: Eco-label gradation and competition," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 164-176.
    20. Long, Zoe & Kormos, Christine & Sussman, Reuven & Axsen, Jonn, 2021. "MPG, fuel costs, or savings? Exploring the role of information framing in consumer valuation of fuel economy using a choice experiment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 146(C), pages 109-127.
    21. Walter, Jason M. & Chang, Yang-Ming, 2020. "Environmental policies and political feasibility: Eco-labels versus emission taxes," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 194-206.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • 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
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:bamber:319884. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/bebamde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.