Advertisement

European Journal of Law and Economics

, Volume 24, Issue 3, pp 215–236 | Cite as

Industrialists hand in hand with environmentalists: how eco-labeling schemes can help firms to raise rivals’ costs

  • Gilles Grolleau
  • Lisette Ibanez
  • Naoufel Mzoughi
Article

Abstract

Industrialists may promote eco-labeling schemes in order to gain the support of environmentalists and ultimately gain market protection. Beyond the environmental effects of such coalitions, these schemes can provide industrialists a legitimate way to disadvantage rivals, frequently foreign rivals, by raising their costs. We consider a Stackelberg model that determines the conditions under which a domestic firm has incentive to impose an eco-label in order to raise the costs of its foreign rivals. The effects of eco-labeling on domestic social welfare are ambiguous. Policy recommendations are drawn. Notably, factors that may help policy makers to identify situations more vulnerable to undesirable outcomes from a welfare viewpoint are developed.

Keywords

Eco-labels Environmental protectionism Raising rivals’ costs 

JEL Classifications

L15 Q18 Q29 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Amacher, G., Koskela, E., & Ollikainen, M. (2004). Environmental quality competition and eco-labeling. Journal of Environmental Economics and Management, 47, 284–306.CrossRefGoogle Scholar
  2. Barrett, S. (1992). Strategy and environment. Columbia Journal of World Business, 27, 202–208.Google Scholar
  3. Barzel, Y. (1982). Measurement costs and the organization of markets. Journal of Law and Economics, 25(1), 27–48.CrossRefGoogle Scholar
  4. Ben Youssef, H., Grolleau, G., & Jebsi, K. (2005). L’utilisation stratégique des instances de normalisation environnementale. Revue Internationale de Droit Economique, 4, 367–388.Google Scholar
  5. Besen, S. M., & Farrell, J. (1994). Choosing how to compete; Strategies and tactics in standardization. Journal of Economic Perspectives, 8(2), 117–131.Google Scholar
  6. Boudreaux, D. J. (1990). Turning back the antitrust clock nonprice predation in theory and practice. The Cato Review of Business & Government, 13(3), 45–52.Google Scholar
  7. Bougherara, D., Grolleau, G., & Thiébaut, L. (2007). Benefiting from a clean environment versus undertaking efforts to protect the environment. Review of Agricultural Economics, 29(2), 216–226.CrossRefGoogle Scholar
  8. Caswell, J. A. (2000). Labeling policy for GMOs: To each his own? AgBioForum. Published by Illinois Missouri Biotechnology Alliance 3 (1/Winter) (http://www.agbioforum.org/), Accessed 15 June 2006.
  9. Coate, M. B., & Kleit, A. N. (1994). Exclusion, collusion, or confusion?: the underpinnings of raising rivals’ costs. Research in Law and Economics, 16, 73–93.Google Scholar
  10. Crespi, J., & Marette, S. (2001). How should food safety certification be financed. American Journal of Agricutural Economics, 83(4), 852–861.CrossRefGoogle Scholar
  11. Depken, G. A., & Ford, J. M. (1999). NAFTA as a means of raising rivals’ costs. Review of Industrial Organization, 15(2), 103–113.CrossRefGoogle Scholar
  12. Director, A., & Levi, E. H. (1956). Law and the future: Trade regulation. Northwestern University Law Review, 51, 281–296.Google Scholar
  13. Gilbert, R. J. (1981). Patents, sleeping patents, and entry deterrence. In Steven C. Salop (Eds.), Strategy, predation, and antitrust analysis (pp. 205–269). Washington D.C.: Federal Trade Commission.Google Scholar
  14. Granitz, E., & Klein, B. (1996). Monopolization by raising rivals’ costs: The standard oil case. Journal of Law and Economic, 39, 1–47.CrossRefGoogle Scholar
  15. Greaker, M. (2006). Eco-labels, trade and protectionism. Environmental and Resource Economics, 33, 1–37.CrossRefGoogle Scholar
  16. Grodsky, J. A. (1993). Certified Green: The law and the future of environmental labeling. Yale Journal on Regulation, 10(1), 147–227.Google Scholar
  17. Grolleau, G., Lakhal, T., & Mzoughi, N. (2004). Does ethical activism lead to firm relocation? Kyklos International Review for Social Sciences, 3, 391–406.Google Scholar
  18. Grote, U. (1999). Sustainable development in the flower sector with eco-labels? Paper presented in the Deutscher Tropentag, Berlin.Google Scholar
  19. Hilke, J. C., & Nelson, P. B. (1984). Noisy advertising and the predation rule in antitrust analysis. American Economic Review, 74(2), 367–371.Google Scholar
  20. Hillman, A. L., & Ursprung, H. W. (1992). The influence of environmental concerns on the political determination of trade policy. In Kym Anderson, Richard Blackhurst (Eds), The Greening of World Trade Issues (pp. 195–220). New York: Harvester Wheatcheaf.Google Scholar
  21. Hillman, A. L., & Ursprung, H. W. (1994). Greens, Super greens, and International Trade Policy: Environmental concerns and protectionism. In Carlo Carraro (Eds.), Trade, innovation, environment (pp. 75–108). Dordrecht: Kluwer Academic.Google Scholar
  22. Karl, H., Orwat, C. (1999). Economic Aspects of Environmental Labelling. In Hank Folmer, Tom Tietenberg (Eds), Yearbook of Environmental and Resource Economics 1999/2000 (pp. 107–170). UK: Edward Elgar Cheltenham.Google Scholar
  23. Körber, A. (1998). Why everybody loves flipper: The Political-Economy of the U.S. Dolphin-Safe laws. European Journal of Political Economy, 14(3), 475–509.CrossRefGoogle Scholar
  24. Liemt, G. V. (2000). The World cut flower industry: Trends and prospects. International Labour Organization.Google Scholar
  25. Lopatka, J. E., & Godek, P. E. (1992). Another look at ALCOA: Raising rivals’ costs does not improve the view. Journal of Law and Economics, 35, 311–329.CrossRefGoogle Scholar
  26. Lyon, T. P. (2003). Green firms bearing gifts. Regulation, 4, 36–40.Google Scholar
  27. Marquez, H. (2005). Americas: Tuna Ban—environmentalism or trade protectionism? Global Information Network, 14, 1.Google Scholar
  28. McCluskey, J. (2000). A game theoretic approach to organic foods: An analysis of asymmetric information and policy. Agricultural and Resource Economics, 29, 1–9.Google Scholar
  29. McWilliams, A., Van Fleet, D. D., et al. (2002). Raising rivals’ costs through political strategy: An extension of resource-based theory. Journal of Management Studies, 39(5), 707–723.CrossRefGoogle Scholar
  30. Morris, J., & Scarlett, L. (1996). Green groceries: Consumers, product labels and the environment. Policy Study, 217, 51.Google Scholar
  31. Nadaï, A. (1998). Des conditions d’émergence d’un écolabel de produit. Qualification environnementale des produits et échange marchand. économie rurale. Agricultures, espaces, sociétés, 244, 32–40.Google Scholar
  32. Nelson, R. R. (1957). Increased rents from increased costs: A paradox of value theory. Journal of Political Economy, 65, 287–294.CrossRefGoogle Scholar
  33. OECD, (2002). The development dimension of trade and environment: Case studies on environmental requirements and market access. Joint Working Party on Trade and Environment, OECD, Paris.Google Scholar
  34. Pablo, S., & Fischer, R. (2000). Standards and protection. Journal of International Economics, 52(2), 377–400.CrossRefGoogle Scholar
  35. Peltzman, S., (1976). Toward a more general theory of regulation. Journal of Law and Economics, 1, 211–240.CrossRefGoogle Scholar
  36. Piotrowski, R., & Kratz, S. (1999). Eco-Labeling in the globalized economy. International Politics and Society, 4, 430–443.Google Scholar
  37. Pirog, R., & Shuh, P. (2000). The load less traveled: Examining the potential of using food miles and CO2 emissions in eco-labels. In: Proceedings of a Conference Eco-labels and the Greening of the Food Market, Boston, Massachusetts, November 7–9.Google Scholar
  38. Reinhardt, F. L. (2000). Down to earth: Applying business principles to environmental management(p. 291). Boston (MA): Harvard Business School Press.Google Scholar
  39. Salop, S. C., & Scheffman, D. T. (1983). Raising rivals’ costs. The American Economic Review, 73, 267–271.Google Scholar
  40. Salop, S. C., & Scheffman, D. T. (1987). Cost-raising strategies. The Journal of Industrial Economics, 1, 19–34.CrossRefGoogle Scholar
  41. Sasidharan, V., Sirakaya, E., & Kerstetter, D. (2002). Developing countries and tourism eco-labels. Tourism management, 23, 161–174.CrossRefGoogle Scholar
  42. Sartzetakis, E. S. (1997). Raising rivals’ costs strategies via emission permits markets. Review of Industrial Organization, 12, 751–765.CrossRefGoogle Scholar
  43. Scheffman, D. T. (1992). The application of raising rivals’ costs theory to antitrust. The Antitrust Bulletin Spring: 187–206.Google Scholar
  44. Scheffman, D., & Higgins, R. S. (2003). 20 years of raising rivals’ costs: History, assessment, and future. George Mason Law Review, 12(2), 371–387.Google Scholar
  45. Stigler, G., (1971). The theory of economic regulation. Bell Journal of Economics and Management Science, 2, 3–21.CrossRefGoogle Scholar
  46. Sturm, D., & Ulph, A., (2002). Environment and trade: The implications of imperfect information and political economy. World Trade Review, 1(3), 235–256.CrossRefGoogle Scholar
  47. Teisl, M. F., & Roe, B. (1998). The economics of labeling: An overview of issues for health and environmental disclosure. Agriculture and Resource Economics Review, 27, 140–150.Google Scholar
  48. Tian, H. (2003). Eco-labelling scheme, environmental protection, and protectionism. Canadian Journal of Economics, 36(3), 608–633.CrossRefGoogle Scholar
  49. Tullock, G., (1967). The welfare costs of tariffs, monopolies and theft. Western Economic Journal, 5, 224–232.Google Scholar
  50. Verbruggen, H., Kuik, O., & Bennis, M. (1995). Environmental regulations as trade barriers for developing countries: Eco-labeling and the Dutch cut flower industry. International Institute for Environment and Development, London.Google Scholar
  51. Vitalis, V., (2002), Private voluntary eco-labels: Trade distorting, discriminatory and environmentally disappointing. Background Paper for the Round Table on Sustainable Development, Paris, December, 6th.Google Scholar
  52. West, K. (1995). Eco-labels: The industrialization of environmental standards. The Ecologist, 25(1), 16–21.Google Scholar
  53. Wijk, J. V. (1994). Floriculture in Colombia. Biotechnology and Development Monitor, 20, 4–5.Google Scholar
  54. Wildavsky, B. (1996). Sticker shock. National Journal, 28(10), 532–534.Google Scholar
  55. Williamson, O. E. (1968). Wage rates as a barrier to entry: The Pennington case. Quarterly Journal of Economics, 82, 85–117.CrossRefGoogle Scholar
  56. WTO. (1998). Environmental labels and market access: Case study on the Colombian flower-growing industry (pp. 98–1038). Committee on Trade and Environment, Geneva, G/TBT/W/60.Google Scholar
  57. Yandle, B. (1983). Bootleggers and baptists: The education of a regulatory economist. Regulation, 7(3), 12–16.Google Scholar
  58. Yandle, B. (1999a). Bootleggers and baptists in retrospect. Regulation, 22(3), 5–7.Google Scholar
  59. Yandle, B. (1999b). Public Choice at the Intersection of Environmental Law and Economics. European Journal of Law and Economics, 8, 5–27.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • Gilles Grolleau
    • 1
  • Lisette Ibanez
    • 2
  • Naoufel Mzoughi
    • 3
  1. 1.Department of EconomicsMontpellier SubAgroMontpellier Cedex 1France
  2. 2.LEF, UMR 356, INRANancy CedexFrance
  3. 3.Ecodéveloppement, UR 767, INRAAvignon Cedex 9,France

Personalised recommendations