In this paper, we investigate the possibility that a non-ethical firm may disguise itself as ethical in order to take advantage of the consumers’ higher willingness to pay for ethical goods. Using a signaling model ` a la Spence, we show that this outcome is pos- sible due to asymmetric information on the type of goods. We discuss the characteris- tics of this equilibrium outcome and we argue that it may jeopardize the functioning of the market for ethical goods. In this analytical framework, we consider the role of certification as a way to prevent such undesired outcome.

Rossi, E., Panaccione, L. (2012). Can asymmetric information undermine the markets for ethical goods? A model of signaling with advertising. In Working Papers del Centro di Ricerche Economiche e Giuridiche dell'università di Roma Tor Vergata. CREG.

Can asymmetric information undermine the markets for ethical goods? A model of signaling with advertising

ROSSI, ENZO;PANACCIONE, LUCA
2012-01-01

Abstract

In this paper, we investigate the possibility that a non-ethical firm may disguise itself as ethical in order to take advantage of the consumers’ higher willingness to pay for ethical goods. Using a signaling model ` a la Spence, we show that this outcome is pos- sible due to asymmetric information on the type of goods. We discuss the characteris- tics of this equilibrium outcome and we argue that it may jeopardize the functioning of the market for ethical goods. In this analytical framework, we consider the role of certification as a way to prevent such undesired outcome.
Settore SECS-P/01 - Economia Politica
English
Rilevanza nazionale
Capitolo o saggio
Asymmetric information, signaling, ethical goods
Rossi, E., Panaccione, L. (2012). Can asymmetric information undermine the markets for ethical goods? A model of signaling with advertising. In Working Papers del Centro di Ricerche Economiche e Giuridiche dell'università di Roma Tor Vergata. CREG.
Rossi, E; Panaccione, L
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/126969
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