Are labels good or bad for consumers and firms? The answers may seem straightforward since labels improve information, yet economic theory reveals situations where their introduction reduces the welfare of, at least, some market participants. This essay reviews the theoretical literature on...

The paper analyses the economic consequences of labeling in a setting with two vertically related markets. Labeling on the downstream market affects upstream price competition through two effects : a differentiation effect and a ranking effect. The magnitude of these two effects determines who...