This paper considers the effects of labels in a duopolistic market. A label certifies the level of some characteristics of a product. It is shown that under a private certifier, the certification level falls short of both profit maximization for the labeling firm and social welfare maximization. Then, different Government policies aimed to improve on the private certifier outcome are analyzed. (i) If public certification is offered, in competition to private, the private certifier will increase the certification standard of his label and welfare will be improved - even though no firm adopts the public label. (ii) A per unit tax on the unlabeled product and a subsidy to the labeled one, which are often observed or advocated, are shown here to lead to unintended results, while (iii) an ad valorem tax can increase welfare
Labeling by a private certifier and public regulation / I. Barry, O. Bonroy, P.G. Garella. - Milano : Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano, 2014 Jun 04.
Labeling by a private certifier and public regulation
P.G. Garella
2014
Abstract
This paper considers the effects of labels in a duopolistic market. A label certifies the level of some characteristics of a product. It is shown that under a private certifier, the certification level falls short of both profit maximization for the labeling firm and social welfare maximization. Then, different Government policies aimed to improve on the private certifier outcome are analyzed. (i) If public certification is offered, in competition to private, the private certifier will increase the certification standard of his label and welfare will be improved - even though no firm adopts the public label. (ii) A per unit tax on the unlabeled product and a subsidy to the labeled one, which are often observed or advocated, are shown here to lead to unintended results, while (iii) an ad valorem tax can increase welfarePubblicazioni consigliate
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.