Eco-Labeling Strategies and Price-Premium

Abstract

Although there is increasing use of eco-labeling, conditions under which eco-labels can command price premiums are not fully understood. In this article, we demonstrate that the certification of environmental practices by a third party should be analyzed as a strategy distinct from—although related to—the disclosure of the eco-certification through a label posted on the product. By assessing eco-labeling and eco-certification strategies separately, researchers can identify benefits associated with the certification process, such as improved reputation in the industry or increased product quality, independently from those associated with the actual label. In the context of the wine industry, we show that eco-certification leads to a price premium while the use of the eco-label does not.