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Abstract
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Before
Regulation is part of the game when firms may falsely signal the environmental performance of a good. The goal of this regulation - sometimes referred to as truth-in-advertising laws - is to deter misleading claims. Following a Beckerian approach, the probability of detection and the fine size are considered by sellers, who then (mis)act accordingly. This project builds on a model which refines the actions of sellers and buyers in the market depending on monetary incentives, beliefs and extra motives (e.g. lying aversion). The equilibria obtained are tested in a laboratory experiment with real commodities and actual purchasing decisions. Different treatments manipulate the probability of detection and aim to establish causality in individual decision responses to stimuli. Behaviourally founded results will provide insights for optimal deterrent policy in the context of green advertising.
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After
Despite being regulated by truth-in-advertising laws, greenwashing continues to be a significant issue, posing challenges to consumer protection and fair competition. Even with these regulations, difficulties in detection and inconsistent enforcement impede a solution to the
problem. This paper explores greenwashing through a variation of a sender-receiver game, incorporating a random inspector responsible for detecting false claims. Using signalling theory, we predict the behaviour of sellers and buyers based on each other’s beliefs. We
then test these predictions in a laboratory setting with real products and consequential purchasing decisions, examining how different detection probabilities influence greenwashing as well as consumption behaviour and beliefs. Not surprisingly, our findings indicate that enforcement primarily acts as a deterrent for sellers. Interestingly, buyers repeatedly purchase green products even when greenwashing is foreseen. Policymakers should address greenwashing differently depending on the weight they give to consumer surplus and environmental
concerns
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JEL Code(s)
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K42, D12, D22, M38
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D12, D82, K42
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Last Published
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May 27, 2025 08:47 AM
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May 31, 2025 07:54 AM
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Additional Keyword(s)
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Consumption, Greenwashing, Enforcement, Green market
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Green consumption, Greenwashing, Enforcement, Label Credence Good
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Keyword(s)
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Before
Behavior, Crime Violence And Conflict, Environment And Energy, Firms And Productivity
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After
Behavior, Environment And Energy, Firms And Productivity
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