Eco-Labeling and the Price Premium

International environmental and government organizations propose eco-labeling as a market incentive to cause industry to operate in an ecologically sustainable and biodiversity-friendly manner. A microeconomic analysis questions whether eco-labeling will cause producer profits in a competitive industry to decline, even under a voluntary system, and whether eco-labeling will necessarily generate different prices for labeled and unlabeled product. Using wood product as an example, results identify conditions that may exist when firms lose profits, even under a voluntary system, and where existing production constraints may lead to a single price, regardless of labeling.

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Working or Discussion Paper
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JEL Codes:
D40; L10; L15
Series Statement:
Discussion Paper 00-04

 Record created 2017-04-01, last modified 2020-10-28

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