Inderscience Publishers

Ecocertification, differentiation in retailing and upstream market power

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Courtesy of Inderscience Publishers

The purpose of ecocertification in the forest sector is to guarantee a sustainable management of the forest resources by the producers (forest owners) and define production rules for the transformation industry. We propose an analysis of the ex-post impact of ecocertification, when it is, on the one hand, a way for retailers to differentiate their products, that may lead, on the other hand, to a reinforcement of producers' market power. We build a model of vertical relationships where two supply chains are in competition, one sells ecocertified wood products, whereas the other sells standard wood products. We show that certification is always profitable for the ecocertified retailer and welfare enhancing. However, if ecocertification works as a catalyst for coordination among producers, the ecocertified retailer can be at a disadvantage if the differentiation between ecocertified and standard wood products is not clear enough in the eyes of the consumer. Interestingly, in this case, only the producers and the retailer of standard wood products benefit from the ecocertification initiated by the ecocertified retailer.

Keywords: wood industry, ecocertification, product differentiation, upstream market power, certification, forestry sector, sustainable management, forest resources, sustainable development, sustainability, competitive supply chains, retailing

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