Does the EU Ecolabel Reduce the Information Asymmetry in Croatia?

Slađana Pavlinović Mršić – University of Split, Faculty of Economics, Business and Tourism, Cvite Fiskovića 5, 21 000 Split, Croatia

Abstract: The information asymmetry creates numerous distortions and reduces the efficiency of the real markets. The fact that real product attributes are not observable by a consumer may demotivate some producers although their pro­duction would lead to an increase in the social welfare. This is a well-studied phenomenon by economists, but still its empirical testing represents a significant challenge due to its intangible nature.

Information asymmetry is often present in the exchange of eco-friendly prod­ucts since very usually the related production materials and techniques are not verifiable by a consumer. This causes the lack of such products in the economy while the brown products prevail. However, the real-world examples show that there exist mechanisms that restore those markets by reducing the information asymmetry, by increasing the trust, or by changing the profile of buyers. One of them elaborated in this paper is the EU Ecolabel in Croatia.

The first part of the research is dedicated to the analysis of adverse selection and the overview of the mechanisms that partly or fully resolve it. The research proceeds with the analysis of the role of the EU Ecolabel as an example of a mech­anism that serves to reduce information asymmetry and to restore the markets for eco-friendly products. The previously developed models are applied to analyze Flash Eurobarometer data in order to shed light on the role of the EU Ecolabel in the market for eco-friendly products in Croatia. The empirical findings lead to critical reflection on the existing theoretical frameworks and to an improved understanding of complex empirical testing of information asymmetry models.

8th International Scientific Conference on Recent Advances in Information Technology, Tourism, Economics, Management and Agriculture – ITEMA 2024 – Conference Proceedings, Hybrid (Zayed University, Dubai, UAE), October 24, 2024

ITEMA Conference Proceedings published by: Association of Economists and Managers of the Balkans – Belgrade, Serbia

ITEMA conference partners: Faculty of Economics and Business, University of Maribor, Slovenia; Faculty of Organization and Informatics, University of Zagreb, Varaždin; Faculty of Geography, University of Belgrade, Serbia; Institute of Marketing, Poznan University of Economics and Business, Poland; Faculty of Agriculture, Banat’s University of Agricultural Sciences and Veterinary Medicine ”King Michael I of Romania”, Romania

ITEMA Conference 2024 Conference Proceedings: ISBN 978-86-80194-89-9, ISSN 2683-5991, DOI: https://doi.org/10.31410/ITEMA.2024

Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-Non-Commercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission.