Two essays on green products

Abstract

Green products have two distinct features which relates to two essays of this thesis, respectively. First, green products are credence goods. Thus ecolabelling by a third party is essential in green product markets. Secondly, transaction relationships between producers and consumers as well as process and production methods (PPMs) may determine environmental effects of products. The first essay deals with eco-labeling which is an instrument to increase credibility of green products. Eco-labelling has caused some concerns about international trade, particularly between developed and developing countries, due to incorporation of non-product-related PPMs into eco-labelling criteria. Most developed countries prefer the inclusion of non-product-related PPMs for the purpose of enhancing effectiveness and efficiency of eco-labelling. Using a simple duopoly model, this essay compares two eco-labelling schemes: one with non-product-related PPMs included and the other without. This is done for the case where there has already existed regulation on the production phase in the form of emission tax. Counter intuitively, the analysis shows that under certain conditions the "exclusion scheme" is socially desirable compared to the "inclusion scheme". It reminds us of the importance of policy mix while introducing eco-labelling. The second essay addresses strategic incentive of introducing products of new concept: free-upgrade-guaranteed products. This kind of products can be expected to save material use and reduce environmental effects for upgrading extends the lifetime of products. It is found that attractiveness of the strategy is mainly dependent upon upgrade cost and duopolists are more likely to introduce the products than monopolists. It is also shown that if consumers`` value for upgrade is low, the products might not be profitable.