engleski

Environmentally Friendly Production and Labelling

Firms’ strategic behaviour regarding environmentally friendly practices is modelled using evolutionary game theory and replicator dynamics. We elaborate the choice of technology and labelling practices when firms perform as bounded rational agents and consider revision of their strategies only occasionally. The framework is information asymmetric because the consumers do not observe a firm type directly, but can infer it indirectly through the market price. We explored the technology strategies of eco- labelled firms. We find that there is an interior unstable state which divided the basins of attraction of two exterior stable states, one where all certified firms are polluting, and another where all certified firms are non- polluting. In order to foster adoption of non- polluting technology, the government should introduce more frequent monitoring and higher penalties for non-alignment with eco-label requirements. We also explored adoption of eco-labels when technology is given and we find an interior evolutionary stable state where certified and non- certified polluting firms co-exist. That is, part of the polluting firms mimic non-polluting ones by eco-labelling their own products. Finally, we conclude that the government may choose between an improvement in minimum environmental standards or stricter monitoring in order to de-stimulate false eco- labelling of polluting firms.

replicator dynamics; green firm; eco-labelling

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