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Green Consumption and Relative Preferences in a Vertically Differentiated International Oligopoly

Giulia Ceccantoni, Ornella Tarola () and Skerdilajda Zanaj ()

Ecological Economics, 2018, vol. 149, issue C, 129-139

Abstract: We consider an open to trade two-country model with two vertically differentiated goods and relative preferences in consumption. These preferences are such that consumers obtain satisfaction from their own consumption in relation to the consumption of the others. Product differentiation is along an environmental quality dimension and countries are asymmetric in average income. Analysing the equilibrium configuration, we find that, when relative preferences are relegated to the poorer country producing the brown good, the process of trade liberalization can favor the polluting firm, while penalizing the green rival. In these circumstances, trade liberalization can be environmentally detrimental. At the opposite, trade liberalization always favors the green producer when relative preferences are observed in both countries, with possibly positive effects on global emissions.

Keywords: Relative preferences; Green consumption; Vertical differentiation; International oligopoly; Trade liberalization (search for similar items in EconPapers)
JEL-codes: D11 F18 L13 (search for similar items in EconPapers)
Date: 2018
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