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Eco-Premium or Eco-Penalty? Eco-Labels and Quality in the Organic Wine Market

Business & Society, Forthcoming

53 Pages Posted: 30 May 2014  

Magali A. Delmas

University of California, Los Angeles (UCLA)

Neil Lessem

The Brattle Group; University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: May 28, 2014

Abstract

Eco-labels emphasize information disclosure as a tool to induce environmentally friendly behaviors by both firms and consumers. The goal of eco-labels is to reduce information asymmetry between producers and consumers over the environmental attributes of a product or service. However, by focusing on this information asymmetry, rather than how the label meets consumer needs, eco-labels may send irrelevant, confusing or even detrimental messages to consumers. In this paper, we investigate how the environmental signal of eco-labels interacts with product characteristics such as brand, quality and price. In a discrete choice experiment the authors examine consumer response to two similar eco-labels for wine, one associated with a quality reduction and the other not. Our results show that respondents preferred both eco-labeled wines over otherwise identical conventional counterparts, when the price was lower and the wine was from a lower quality region. However they preferred conventional more expensive wine from a high quality region. This indicates that respondents obtain some warm glow value from eco-labeled wine, but also possibly interpret it as a signal of lower quality. This relationship held across both types of eco-labels, meaning that consumers did not understand the difference between them. Our research contributes to the literature on information disclosure policies by highlighting important elements for effective eco-labels. These include consumer awareness and understanding of the eco-label, and consumer willingness to pay for an eco-labeled product. Our research emphasizes the need to create eco-labels that communicate clearly both the environmental attributes and the private benefits associated with them.

Keywords: green marketing, organic wine, eco-label, eco-premium, differentiation strategy, corporate social responsibilty, environment

JEL Classification: C91, D12, D82, M3, Q2, K3

Suggested Citation

Delmas, Magali A. and Lessem, Neil, Eco-Premium or Eco-Penalty? Eco-Labels and Quality in the Organic Wine Market (May 28, 2014). Business & Society, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2443145

Magali A. Delmas (Contact Author)

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

Neil Lessem

The Brattle Group ( email )

Suite 2800
201 Mission Street
San Francisco, CA 94105
United States

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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