Green consumerism and pollution control

Parkash Chander and S. Muthukrishnan

Journal of Economic Behavior & Organization, 2015, vol. 114, issue C, 27-35

Abstract: In this paper, we show that collective action by environmentally aware/green consumers, who derive benefits from consuming environmentally cleaner products, can reduce pollution and improve social welfare in the same manner as pollution taxes or subsidies for reducing pollution can. We construct a model with two competing firms each producing a good of different environmental quality and two types of consumers with high and low preferences for environmental quality and characterize a benchmark equilibrium in which each consumer acts individually and disregards that his decision to buy a good may affect the level of pollution. We then show that, compared to the benchmark equilibrium, collective action by consumers with high preference who take into account the impact of their combined decision to buy a good on pollution will result in an equilibrium with not only lower pollution and higher social welfare, but also higher prices and profits for the firms.

Keywords: Environmentally aware/green consumers; Environmental quality; Collective action; Pollution; Public good; Vertically differentiated duopoly (search for similar items in EconPapers)
JEL-codes: H23 H41 L13 Q50 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:114:y:2015:i:c:p:27-35

DOI: 10.1016/j.jebo.2015.02.013

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