Competing Environmental Labels

We study markets in which consumers prefer environmentally friendly products but cannot determine the environmental quality of any given firm’s product on their own. A non-governmental organization (NGO) can establish a voluntary standard and label the products of firms whose products comply with the standard. Alternatively, industry can create its own standard and label. We compare the stringency of these two labels, and analyze how they interact. ∗We would like to thank the EPA STAR program and the Mistra Foundation for financial support, and Mark Bagnoli for helpful comments. †Senior Fellow, Resources for the Future, 1616 P St, NW, Washington, DC 20036. Email: [email protected]. ‡Dow Chair of Sustainable Science, Technology and Commerce, Ross School of Business, University of Michigan, Ann Arbor, MI, 48109. Email: [email protected]. 1