Industrialists hand in hand with environmentalists: how eco-labeling schemes can help firms to raise rivals’ costs |
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Authors: | Gilles Grolleau Lisette Ibanez Naoufel Mzoughi |
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Affiliation: | (1) Department of Economics, Montpellier SubAgro, 2, place Pierre Viala—Bat. 26, Montpellier Cedex 1, 34060, France;(2) LEF, UMR 356, INRA, 14, rue Girardot, Nancy Cedex, 54042, France;(3) Ecodéveloppement, UR 767, INRA, Domaine Saint-paul - Site Agroparc, Avignon Cedex 9,, 84914, France |
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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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Keywords: | Eco-labels Environmental protectionism Raising rivals’ costs |
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