| Abstract: | The ethos of “green” marketing is to affect tastes and perceptions so that those individuals for whom the attribute of environmental‐friendliness is significant can signal this preference by choosing the “green” alternative. This paper presents a strategic behavioural model of interactions between two agents, a firm and consumer, under conditions of incomplete information. The outcome of the model is that, unless some restrictive and (arguably) unrealistic conditions apply, some proportion of “green” marketing campaigns will be misleading; “green” marketing is not restricted to “green” products, and “green” consumers only adapt their purchasing habits some of the time. Ecolabelling schemes can be used as a means of ameliorating this inefficiency in information‐transfer. Whether state intervention to make ecolabelling mandatory for “green” products is welfare‐improving depends on the balance between the deadweight losses from the process and the gains in terms of facilitating the expression of “green” preferences. |
