International Review of Environmental and Resource Economics > Vol 6 > Issue 4

The Economics of Eco-Labeling: Theory and Empirical Implications

Charles F. Mason, Department of Economics & Finance, University of Wyoming,
Suggested Citation
Charles F. Mason (2013), "The Economics of Eco-Labeling: Theory and Empirical Implications", International Review of Environmental and Resource Economics: Vol. 6: No. 4, pp 341-372.

Publication Date: 09 Apr 2013
© 2013 C. F. Mazon
Environmental Economics
Asymmetric informationEco-labelingEnvironmental economicsSignalingTesting


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In this article:
1 Introduction 
2 Deterministic Certification 
3 Probabilistic Certification 
4 Ecolabeling and Endogenous Types 
5 Heterogeneous Costs 
6 Endogenous Labels 
7 Empirical Implications 
8 Conclusion 


Over the past several years, environmental economists have been increasingly attracted to the use of information as an alternative to traditional methods for regulating externalities. An example of this approach is "eco-labeling," where a third party certifies firms' products; this approach is particularly popular in practice, having been adopted in a variety of countries. With this widespread adoption of eco-labeling, a literature has developed in environmental economics. In this paper, I survey the equilibria that may occur with eco-labeling, and discuss the resultant welfare effects.