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Competing eco-labels and product market competition

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  • Li, Yi

Abstract

I examine the impact of competition between eco-labeling programs in a market where eco-labels that communicate information about product's environmental quality (a credence attribute) are also strategic variables for competing firms. Specifically, I consider a dynamic setting where an industry-sponsored eco-labeling program and a program sponsored by environmental NGOs compete strategically in setting the labeling standards, before price-setting firms make strategic choices of which eco-label (if any) to adopt; adopting firms not presently meeting the labeling standards undertake costly quality improvement to comply with them. I find that the competition between eco-labeling programs may lead to the same high environmental benefit as when there exists only the NGO program. I also find that the competition may yield higher social welfare.

Suggested Citation

  • Li, Yi, 2020. "Competing eco-labels and product market competition," Resource and Energy Economics, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:resene:v:60:y:2020:i:c:s0928765518303269
    DOI: 10.1016/j.reseneeco.2020.101149
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    More about this item

    Keywords

    Eco-labels; Eco-label competition; Environmental quality; Duopoly;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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