ABSTRACT
Given the interest in eco-labels, and the rapidly growing descriptive literature on eco-label programs (see, for example, the various chapters in Zarrilli, Jha, and Vossenaar, 1997), there has been limited theoretical analysis of the consumer response to labeled products, the resulting market impacts, and the eventual impact on reducing environmental externalities. Mattoo and Singh (1994) and Swallow and Sedjo (2000) begin to analyze the market impacts from introducing an eco-label program. Mattoo and Singh (1994) is a partial equilibrium analysis focused on voluntary labeling of a credence attribute for an otherwise homogeneous product. In the post-label equilibrium, 'eco-consumers' only purchase the labeled item, while 'non-eco-consumers' only purchase the item with the lowest price.2
