Public, private and nonprofit regulation for environmental quality

This paper studies the welfare implications of different institutions certifying environmental quality supplied by a monopoly. The monopolist can voluntarily certify the quality of the product through an eco-label provided either by an NGO or a for-proft private certifier (PC). The NGO and the PC may use advertisement to promote the label. We compare the NGO and PC regimes with the regime where the regulator imposes a minimum quality standard. The presence of a private certifier in the market decreases the scope for public intervention. The availability of green advertisement reinforces the above result.Environmental quality, certification, green advertisement, NGO, self-regulation.

Public, private and non-profit regulation for environmental quality

DEA Working Papers ; 33This paper studies the welfare implications of different institutions certifying environmental quality supplied by a monopoly. The monopolist can voluntarily certify the quality of the product through an eco-label provided either by an NGO or a for-proft private certifier (PC). The NGO and the PC may use advertisement to promote the label. We compare the NGO and PC regimes with the regime where the regulator imposes a minimum quality standard. The presence of a private certifier in the market decreases the scope for public intervention. The availability of green advertisement reinforces the above result

Imperfect certification in a Bertrand duopoly

A label that imperfectly signals product quality is analyzed in a Bertrand duopoly with differentiated products. Considering strategic firms when certification is imperfect has some important implications. A separating equilibrium can be sustained with a free test due to price strategic complementarity. When the certifier’s objective is welfare, and the test cost is sufficiently small, the most appropriate test is that which is subject to a low rate of false negatives

Standards, Voluntary Labels, and International Trade

We develop a vertical differentiation model for the setting of standards and labeling in an international economy with two countries, North (N) and South (S) under two regimes: Autarky and International Trade. We assume that a firm in country S has a comparative advantage in producing low quality goods while a firm in country N has comparative advantage in producing high quality goods. Under Autarky each country sets a specific standard and the domestic firm behaves as a monopolist. Under International Trade both countries agree on harmonized standards and firms compete in the unified market. We show that standards harmonization is welfare enhancing compared to the Autarky scenario and that the introduction of a national label in country N does not lead to a Pareto improvement in country S. Consumers in both countries will be worse off with the introduction of the label, for low levels of firm S's comparative advantage