WEAI/AERE 2009 - Individual Paper Abstract
Title: Eco-Labeling of Services: The Blue Flag
Author(s): Toni Sipic, University of Oregon, Department of Economics, 430 PLC, Eugene, OR, 97403, tsipic@uoregon.edu
Abstract:
Eco-labeling of products and services arises from the need to solve information asymmetry between consumers demanding environmentally friendly goods or services, and producers supplying them. Without such a scheme, consumers could not easily differentiate between producers, resulting in decreased production of, a more costly, but environmentally friendly products or services. However, in the presence of eco-labeling, producers are likely to command a price premium on environmentally friendly products or services.
Recent empirical literature has explored the effectiveness of eco-labels in achieving these goals in various settings. However, the majority of studies have focused on labeling of goods, while no such extension to services has been addressed. Given the ever-increasing importance of services in the economy, this study aims to fill the gap in the literature by identifying the determinants of price premiums associated with eco-labeling in services.
To this end, the study focuses on the impact of the Blue Flag eco-label for nautical marinas and beaches on the prices of various tourism services. Blue Flag is a voluntary environmental label awarded by an independent non-governmental organization to marinas and beaches meeting its 29 criteria covering the aspects of environmental education, water quality, environmental management and safety. In 2008, over 3300 beaches and marinas worldwide were awarded the Blue Flag. A unique dataset is compiled from nautical marina, sailboat charter and hotel brochures from the Croatian Adriatic Sea region in 2008. Furthermore, data on the Blue Flag environmental certification of marinas and beaches is used to identify label impact of ecolabeling of both marinas and beaches on: marina daily, monthly and yearly slip-rental prices; weekly sailboat charter rental price; and daily hotel room prices. In addition, data on government testing of the beaches is utilized to estimate the independent effects of water quality and the ecolabel.
The results suggest that a Blue Flag certified marina commands, on average, about a 32% premium in terms of daily-slip rental price it charges. Average distance to a Blue Flag certified beach is found to have a positive impact on marina daily and monthly slip rental prices. Furthermore, sailboats whose home marina is awarded the Blue Flag carry, on average, a 7% price premium on a weekly sailboat rental. Proportion of marinas in a region awarded the Blue Flag certification is found to have a positive impact on weekly sailboat charter prices.