But What Does it Mean? Competition between Products Products Carrying Green Labels when Consumers are Active Acquirers of Information

39 Pages Posted: 3 Dec 2019

See all articles by Anthony Heyes

Anthony Heyes

University of Ottawa - Department of Economics

Sandeep Kapur

University of London

Peter W. Kennedy

University of Victoria - Department of Economics

Steve Martin

University of Ottawa - Department of Economics

John W. Maxwell

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy; Indiana University, Department of Economics; Richard Ivey School of Business

Date Written: August 1, 2019

Abstract

Programs that certify the environmental (or other social) attributes of firms are common. But the proliferation of labeling schemes makes it difficult for consumers to know what each one means – what level of ‘greenness’ does a particular label imply? We provide the first model in which consumers can expend effort to learn what labels mean. The relationship between information acquisition costs, firm pricing decisions, the market shares obtained by alternatively labeled goods and a brown ‘backstop’ good, and total environmental impact prove complex. Consumer informedness can have perverse implications. In plausible cases a reduction in the cost of information damages environmental outcomes. Our results challenge the presumption that provision of environmental information to the public is necessarily good for welfare or the environment.

Keywords: eco-labeling, green consumerism,information-based instruments

JEL Classification: D83, L15, L31, Q52

Suggested Citation

Heyes, Anthony and Kapur, Sandeep and Kennedy, Peter W. and Martin, Steve and Maxwell, John W., But What Does it Mean? Competition between Products Products Carrying Green Labels when Consumers are Active Acquirers of Information (August 1, 2019). Available at SSRN: https://ssrn.com/abstract=3489210 or http://dx.doi.org/10.2139/ssrn.3489210

Anthony Heyes (Contact Author)

University of Ottawa - Department of Economics ( email )

Social Sciences Building Room 9005
Ottawa, Ontario K1N 6N5
Canada

Sandeep Kapur

University of London ( email )

Senate House
Malet Street
London, WC1E 7HU
United Kingdom

Peter W. Kennedy

University of Victoria - Department of Economics ( email )

3800 Finnerty Rd
Victoria, BC V8W 2Y2 V8P 5C2
Canada
250-721 8530 (Phone)
250-721 6214 (Fax)

HOME PAGE: http://web.uvic.ca/~pkennedy/

Steve Martin

University of Ottawa - Department of Economics ( email )

120 University pvt.
Ottawa, Ontario K1N 6N5
Canada

John W. Maxwell

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Department of Business Economics and Public Policy
Kelley School of Business, Indiana University
Bloomington, IN 47405
United States
812-855 9219 (Phone)
812-855 3354 (Fax)

HOME PAGE: http://johnwmaxwell.com

Indiana University, Department of Economics ( email )

Wiley Hall
Bloomington, IN
United States

Richard Ivey School of Business ( email )

The University of Western Ontario
1151 Richmond Street North
London, Ontario N6A3K7
Canada
5198502439 (Phone)
5198502306 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
14
Abstract Views
221
PlumX Metrics