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.
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Grolleau, G., Ibanez, L. & Mzoughi, N. Industrialists hand in hand with environmentalists: how eco-labeling schemes can help firms to raise rivals’ costs. Eur J Law Econ 24, 215–236 (2007). https://doi.org/10.1007/s10657-007-9034-6
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DOI: https://doi.org/10.1007/s10657-007-9034-6