The effects of environmental quality misperception on investments and regulation

Luca Lambertini (), Giuseppe Pignataro and Alessandro Tampieri

International Journal of Production Economics, 2020, vol. 225, issue C

Abstract: This paper analyzes whether consumers’ misperception on the quality of the product influences firms’ investment choices. We examine a setup with horizontal and vertical (green) differentiation, where consumers are heterogeneous in the exogenous perception of environmental quality. Demands, true qualities and profits are increasing in the perception of higher quality, while the investment in green quality is high for high and low degrees of product substitutability. We further consider the introduction of either an emission tax or an environmental standard. Both interventions increase the investment in green quality. We show that for low marginal damages, the environmental standard increases quality, while taxation is more effective when the environmental damage is large.

Keywords: Green quality; Misperception; Pigouvian; Taxation; Environmental standard (search for similar items in EconPapers)
JEL-codes: L13 L51 Q50 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: The effect of Environmental Quality Misperception on Investments and Regulation (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:225:y:2020:i:c:s0925527319304207

DOI: 10.1016/j.ijpe.2019.107579

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