Eco‐labelling by a for‐profit certifier: Countervailing power and its consequences |
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Authors: | Ibrahima Barry Olivier Bonroy Paolo G Garella |
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Institution: | 1. INRA, Université Grenoble Alpes, UMR GAEL;2. Department of Economics, Management, and Quantitative Methods, University of Milano |
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Abstract: | For‐profit certifier's eco‐labelling is common in industries where firms have some “countervailing power” on sharing gains from labelling. We show that the certification standard for an environmental quality is lowered when firms have strong “power.” A certifier with too low bargaining power will prefer to sell to the best offer rather than bargain. This switch in the selling mechanism also thwarts his incentives in setting the standard. This is consequential for evaluating policies. The dimensions and even signs of welfare changes induced by taxes and subsidies depend upon the mechanism used, and ultimately upon firms’ countervailing power. |
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