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Wasteful Labeling

Author

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  • Philippe Mahenc

    (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UPVM - 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

The role of labeling is to solve the adverse selection problem caused by unsubstantiated claims from …rms. The problem however is likely to remain unsolved if the labeling agency is not trustworthy. She can be suspected to divert the fees charged for labeling from their primary purpose of collecting information in order to raise excessive revenue. This paper addresses this issue and shows that labeling may be wasteful due to consumers'scepticism about the trustworthiness of labeling. To award …rms green labels, the agency may charge fees that exceed the Ramsey level at which the revenue needed for collecting information is raised with a minimal loss in terms of e¢ ciency.

Suggested Citation

  • Philippe Mahenc, 2009. "Wasteful Labeling," Post-Print hal-02081034, HAL.
    • Handle: RePEc:hal:journl:hal-02081034
    Note: View the original document on HAL open archive server: https://hal.science/hal-02081034
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    References listed on IDEAS

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    Cited by:

    1. Brécard, Dorothée, 2014. "Consumer confusion over the profusion of eco-labels: Lessons from a double differentiation model," Resource and Energy Economics, Elsevier, vol. 37(C), pages 64-84.
    2. Hattori, Keisuke & Higashida, Keisaku, 2014. "Misleading advertising and minimum quality standards," Information Economics and Policy, Elsevier, vol. 28(C), pages 1-14.
    3. 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.
    4. Philippe Mahenc, 2017. "Honest versus Misleading Certification," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 454-483, June.
    5. Pio Baake & Helene Naegele, 2017. "Competition between For-Profit and Industry Labels: The Case of Social Labels in the Coffee Market," Discussion Papers of DIW Berlin 1686, DIW Berlin, German Institute for Economic Research.
    6. Mireille Chiroleu-Assouline, 2016. "Multiple Standards: the Case of the French Building Industry," Policy Papers 2016.08, FAERE - French Association of Environmental and Resource Economists.
    7. repec:gbl:wpaper:2013-01 is not listed on IDEAS

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