Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333504 
Year of Publication: 
2025
Series/Report no.: 
Working Paper No. 2511
Publisher: 
Johannes Kepler University of Linz, Department of Economics, Linz
Abstract: 
Consumers increasingly value the environmental and social responsibility of the production processes used by firms, yet these processes often remain unobservable, even after consumption. In this paper, we develop a simple model to examine firms' technology choices and subsequent price competition in markets for such label credence goods with hidden process attributes. Using a multi-sender signaling framework, we show that in the payoff-dominant equilibrium, firms can partially signal their production choices and avoid Bertrand competition when at least one firm adopts a green technology. Surprisingly, increasing consumers' environmental concern or eliminating the information asymmetry may reduce social welfare by discouraging green production.
Subjects: 
label credence goods
technology choice
asymmetric information
price competition
signaling
green production
JEL: 
D82
D83
L13
L15
Document Type: 
Working Paper

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