Skip to main content
Open Access Publications from the University of California


UCLA Previously Published Works bannerUCLA

Eco-Premium or Eco-Penalty? Eco-Labels and Quality in the Organic Wine Market


Eco-labels emphasize information disclosure as a tool to induce environmentally friendly behaviors by both firms and consumers. The goal of eco-labels is to reduce information asymmetry between producers and consumers over the environmental attributes of a product or service. However, by focusing on this information asymmetry, rather than on how the label meets consumer needs, eco-labels may send irrelevant, confusing, or even detrimental messages to consumers. In this article, the authors investigate how the environmental signal of eco-labels interacts with product characteristics such as brand, quality, and price. In a discrete choice experiment, the authors examine consumer response to two similar eco-labels for wine, one associated with a quality reduction and the other not. The results show that respondents preferred both eco-labeled wines over otherwise identical conventional counterparts when the price was lower and the wine was from a lower quality region. However, they preferred conventional, more expensive wine from a high-quality region. This preference indicates that respondents not only obtain some warm glow value from eco-labeled wine but also possibly interpret eco-labeling as a signal of lower quality. This relationship held across both types of eco-labels, meaning that consumers did not understand the difference between them. This research contributes to the literature on information disclosure policies by highlighting important elements for effective eco-labels. These elements include consumer awareness and understanding of the eco-label, and consumer willingness to pay for an eco-labeled product. The results emphasize the need to create eco-labels that communicate clearly both the environmental attributes and the private benefits associated with them.

Many UC-authored scholarly publications are freely available on this site because of the UC's open access policies. Let us know how this access is important for you.

Main Content
For improved accessibility of PDF content, download the file to your device.
Current View