Journal article
Can mandatory certification promote greenwashing? : A signaling approach
Journal of public economic theory, Vol.22(6), pp.1801-1851
12/01/2020
Abstract
This paper examines how positive or negative perceptions about innovation affect firms' strategic behavior when certifying their products. In particular, we consider two types of firm (innovative and noninnovative) which choose between three signals: (a) certified claim, (b) uncertified claim, and (c) no claim. The consumer, either exhibiting positive or negative perceptions, is uninformed about the firm's type and only observes the firm's claim. We find that a separating equilibrium arises in which information about the innovation is revealed to consumers. We also identify a pooling equilibrium in which both types of firm choose the same claim, concealing information from consumers. We show that regulation requiring mandatory certification can hinder information transmission. Our results also indicate that changes in product perceptions do not necessarily facilitate information transmission.
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Details
- Title
- Can mandatory certification promote greenwashing?
- Creators
- Dolores Garrido - Washington State UniversityAna Espinola-Arredondo - Washington State UniversityFelix Munoz-Garcia - Washington State University
- Publication Details
- Journal of public economic theory, Vol.22(6), pp.1801-1851
- Academic Unit
- Economic Sciences, School of
- Publisher
- Wiley
- Number of pages
- 51
- Identifiers
- 99900971337301842
- Language
- English
- Resource Type
- Journal article