This article studies the role of pricing as a signal of environmental performance for polluting products to green consumers. It is shown that high environmental performance is signaled through a high price when less polluting products are more costly to produce. Consequently, the level of pollution is distorted downward relative to what would prevail under full information. (C) 2006 Elsevier B.V. All rights reserved.
Signaling the environmental performance of polluting products to green consumers
3 April 2018