Competing Environmental Labels

We study markets in which consumers prefer environmentally friendly products but cannot determine the environmental quality of any given firm´s product on their own. A non-governmental organization (NGO) can establish a voluntary standard and label products that comply with it. Alternatively, industry can create its own standard and label. We compare the stringency of these two types of labels, and study their strategic interaction when they co-exist. We find that environmental benefits may be smaller in the presence of both labels than with the NGO label alone, and characterize when label competition is more likely to produce negative environmental effects.

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Fischer, Carolyn
All authors:
Carolyn Fischer, Thomas P. Lyon
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Updated: 2013-03-14