Abstract

This paper examines competition among non-governmental organizations (NGOs) that act as standard-setting organizations when firms selling labeled products have market power in the product market. We consider a double duopoly model in which NGOs compete to offer firms labels for sustainability quality and firms compete to sell vertically differentiated products. We assume that NGO preferences for standard quality levels differ, with some being quality-driven organizations and others being market-driven organizations. We find that these two NGO types must have very different preferences to be present in the label market. Moreover, competition between these two types of NGOs leads to a decrease in standards provided by the quality-driven NGO, an increase in standards provided by the market-driven NGO, and an increase in overall weighted sustainability quality.

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