Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2026-05-08
Number: 26-019/VIII
Author-Name: Erik Ansink
Author-Workplace-Name: Vrije Universiteit Amsterdam
Author-Name: Frederic Klapwijk
Author-Workplace-Name: Vrije Universiteit Amsterdam
Title: Tier count in traffic-light eco-labels
Abstract: We study whether the number of tiers in a traffic-light eco-label affects consumer welfare. We develop a model in which consumers observe price, quality, and the label tier, but infer a product's environmental quality ("greenness'") imperfectly. In that setting, adding a tier can improve the information content of the label while still lowering welfare near newly created cutoffs. We then use a discrete choice experiment on trash bags with two-tier and three-tier traffic-light labels to test the behavioral ingredients of the model. Estimated treatment effects in the choice experiment show that adding a middle tier makes respondents more likely to choose the highest label tier, increases price sensitivity, and reduces the use of price as a cue for greenness. We interpret these results as evidence that tier count changes both the choice response to the highest label tier and price-based inference. A structural interpretation also yields a positive estimate of the price-proxy parameter, and the three-tier choice data imply a positive but modest separation between the yellow and green tiers under transparent normalizations.
Classification-JEL: D12, D83, L15, Q58
Keywords: Eco-labels, traffic-light labels, consumer inference, environmental disclosure, consumer welfare
File-URL: https://papers.tinbergen.nl/26019.pdf
File-Format: application/pdf
File-Size: 811.421 bytes
Handle: RePEc:tin:wpaper:20260019