Environmental campaigns and endogenous technology choice under international oligopoly

Eleni Stathopoulou ()

No 14/10, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: In an international duopoly context, where two goods are produced by two firms located in two separate countries, F and NF, we study the issue of firms' environmental technology choice. When consumers in country F are environmentally aware, in the sense that they care about emissions in their own country, it is shown that the firm in country F adopts a cleaner technology compared to the firm in country NF. Moreover, leakage appears, as the demand by consumers in country F shifts to the good produced by the firm in country NF. This, in turn, provides a rationale for raising awareness among consumers in country F about the effects of their consumption on pollution in country NF. Thereby, this paper adds to the existing literature by analysing how this increased awareness may affect consumers' demand for the domestic and the foreign good and, therefore, firms' endogenous technology choice. Also, changes in each country's and aggregate pollution are examined in order to assess whether having domestic consumers aware of foreign emissions could be considered as an option for tackling leakage.

Date: 2014-07
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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