Eco-Labels: Modeling the Consumer Side

Abstract

The theoretical literature analyzing eco-label programs has focused mainly on how intricate interactions between firms, eco-label certifiers, and regulators shape these programs’ economic and environmental outcomes. Far less attention has been paid to the consumer side, which has typically been modeled very simply. Meanwhile, empirical researchers in behavioral economics, social psychology, and market research have accumulated a large body of empirical evidence that paints a rich, complex picture of that consumer. In this review, I survey a range of these empirical findings, as well as attempts by theorists to incorporate them in their models. The survey is organized around three themes: (a) varieties of consumer ignorance, (b) context dependence of consumer motivations, and (c) motivational spillover effects across time and people. I also touch on the relative importance of private and public benefits of eco-label programs and on the debate over whether the private benefits should even be counted in welfare.