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Social labeling by competing NGOs: a model with multiple issues and entry

journal contribution
posted on 2023-06-09, 03:58 authored by Anthony Heyes, Steve Martin
In many settings firms rely on nongovernmental organizations (NGOs) to certify prosocial attributes embodied in their products. We provide a model of competition between NGOs in the provision of labeling services. Competition between a fixed number of NGOs features a “race to the top” in labeling standards, but entry of NGOs offering new labels pushes standards down. In a wide range of settings NGO entry and competition results in too many labels being adopted, with each label being too stringent. Compared to a setting in which firms can credibly communicate the social attributes of their products, labels demand greater prosocial behavior than is desired by firms, although with proliferation of the number of labels this discrepancy disappears. In contrast to existing models, firms may engage in excessive corporate social responsibility when they rely on an NGO as a certifying intermediary.

History

Publication status

  • Published

Journal

Management Science

ISSN

0025-1909

Publisher

INFORMS

Issue

6

Volume

63

Page range

1800-1813

Department affiliated with

  • Economics Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2016-11-08

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