Template-Type: ReDIF-Paper 1.0
Title: The Market for Ethical Goods
Author-Name: Nicolas Bonneton
Author-Email: nicolas.bonneton@gmail.com
Classification-JEL: L31, L15, D91
Keywords: corporate social responsibility, prosocial behavior, ethical labels, subsidy, organic

Abstract: This paper examines the unintended consequences of the rapid growth of markets
for ethically labeled goods such as "organic" or "child-labor-free", using a model of
voluntary labeling. On the supply and demand side, agents act based on their intrinsic
motivation and monetary payoff. After a positive demand shock, the expected social
and environmental attributes of both labeled and unlabeled goods deteriorate. As
such, even if producing ethically labeled goods help mitigates externalities, it can be
optimal for policymakers not to intervene and sometimes to tax these goods. Sorting
in this market is non-trivial: under plausible conditions, only the most and least
intrinsically motivated agents strategically position themselves in the ethical segment
of the market

Note: 
Length: 45
Creation-Date: 2023-05
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp426
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2023_426