Working paper
Signaling under Bilateral Uncertainty: Do Green Consumers Lead to More Greenwashing?
11/08/2019
DOI:
https://doi.org/10.7273/000004765
Abstract
This paper examines the role of …rms'uncertainty about consumers'environmental concerns in the emergence of greenwashing. We consider a signaling model where a …rm (either green or brown) chooses whether to acquire a green label to signal its type to consumers (either green or brown). Uncertainty stems from two sources: consumers are uninformed about the …rm's type, and …rms are uninformed about the consumer's type. We examine under which conditions information transmission arises in equilibrium, showing that it critically depends on: (i) the proportion of green consumers; (ii) the premium that green consumers assign to the green good, relative to brown consumers; (iii) the labeling cost di¤erential between brown and green …rms; and (iv) the penalty that …rms su¤er after practicing greenwashing from green, relative to brown, consumers. We also identify situations in which pooling equilibria promoting greenwashing are sustained. We …nd that bilateral uncertainty, relative to the case in which only the consumer is uninformed (unilateral uncertainty), may hinder greenwashing. We would like to especially thank Carmen Arguedas, Mads Greaker, and Santiago Rubio for their insightful comments and suggestions at the 3rd AERNA Workshop on Game Theory and The Environment in Valencia, Spain. We also are greatful to Charles F. Mason and Yi Li for their useful feedback and to participants at the 94th WEAI Annual Conference in San Francisco, CA, and at the 15th WEAI International Conference in Tokyo, Japan, for comments and suggestions. y 323D
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Details
- Title
- Signaling under Bilateral Uncertainty: Do Green Consumers Lead to More Greenwashing?
- Creators
- Dolores Garrido (Author) - Washington State UniversityAna Espinola-Arredondo (Author) - Washington State University, Economic Sciences, School ofFelix Munoz-Garcia (Author) - Washington State University, Economic Sciences, School of
- Academic Unit
- Economic Sciences, School of
- Identifiers
- 99900972241101842
- Language
- English
- Resource Type
- Working paper