Eco-design of eco-labels with coarse grades

• Multi-tier labels can be environmentally better than binary for products with limited supply. Usefulness of multi-tier depends on the cost and supply characteristics market. Our findings call into question common practice offering labels. We consider a third-party eco-label certifier that aims to reduce total environmental impact production non-target resources consumption rate target resources. With these objectives determines standards coarse grades certification. Eco-labeled involves fixed investment cost, larger marginal restricted access supply, while eco-labeled command price premium. In response given grading scheme, we analytically characterize subgame perfect equilibria two-stage game quality quantity competition in duopolistic setting. then conduct numerical experiments gain insights whether when multi-grade eco-labels may more useful single-grade by providing protection dual certifier. While multiple an appear market asymmetric firms, our results indicate indeed under additional conditions: (i) costs are asymmetric, (ii) either if firm advantage has sufficiently low mild restrictions or very different, (iii) bases only moderately large. uncover role play eco-design eco-labels, calling eco-labels.