The Production of Eco-Labels |
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Authors: | Christopher Bruce Andrea Laroiya |
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Institution: | (1) Department of Economics, University of Calgary, 2500 University Dr. N.W., Calgary, AB, T2N 1N4, Canada;(2) Alberta Energy Utility Board, Calgary, AB, T2N 1N4, Canada |
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Abstract: | Eco-labeling is a market-based technique for conveying information about consumers’ demands for environmental protection.
Most criticisms of eco-labeling have concentrated on demand-side issues – the potential for firms or countries to use eco-labels
to manipulate market power – and the difficulty of creating credible labels. In this paper, we argue that fundamental problems
also arise on the production side. Specifically, we argue that both increasing returns to scale and complexities in production imply that it will be possible
to market only a small percentage of environmental attributes through the use of eco-labels. We present evidence for our hypotheses
from a detailed survey of 100 randomly-selected consumer products.
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Keywords: | consumer demand eco-labeling endangered species environmental decision-making production function |
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