Can Mandatory Certification Promote Greenwashing? A Signaling Approach

Ana Espinola-Arredondo, Dolores Garrido () and Felix Munoz-Garcia
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Dolores Garrido: Washington State University, https://students.ses.wsu.edu/dolores-garrido/

No 2018-5, Working Papers from School of Economic Sciences, Washington State University

Abstract: This paper examines how positive or negative perceptions about innovation a§ect Örmsístrategic behavior when certifying their products. In particular, we consider two types of Örm(innovative and non-innovative) which choose between three signals: (1) certiÖed claim, (2)uncertiÖed claim, and (3) no claim. The consumer, either exhibiting positive or negative perceptions, is uninformed about the Örmís type and only observes the firm's claim. We find that a separating equilibrium arises in which information about the innovation is revealed to consumers. We also identify a pooling equilibrium in which both types of Örm choose the same claim, concealing information from consumers. We show that regulation requiring mandatorycertiÖcation can hinder information transmission. Our results also indicate that changes in product perceptions do not necessarily facilitate information transmission

Keywords: Signaling game; innovation; certiÖcation; greenwashing (search for similar items in EconPapers)
JEL-codes: D81 D82 L15 Q50 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2018-07-24
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Related works:
Journal Article: Can mandatory certification promote greenwashing? A signaling approach (2020)
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