Green competition, hybrid equilibrium, and establishment of a resale market

Arthur Caplan and Reza Oladi

International Review of Economics & Finance, 2018, vol. 58, issue C, 259-269

Abstract: This paper investigates competition between firms whose choices of how much “green effort” to devote to building their reputations as socially responsible producers are determined in the contexts of simultaneous-move and hybrid simultaneous/sequential-move Bertrand equilibria. We derive conditions under which (1) the inter-temporal, green-effort reaction function of the firm with the less-aggressive green strategy is non-monotonic, (2) the level of green effort chosen by the firm with the more-aggressive green strategy increases when it views itself as the leader in a hybrid game rather than moving concurrently in a simultaneous-choice game, and (3) the establishment of a resale market by the more aggressive firm acts as a substitute for its choice of green-effort level. The sufficiency conditions underlying these results impose qualitative restrictions on the more-aggressive firm's lagged (i.e., reputational) and contemporaneous cross effects of its green effort on demand for the less-aggressive firm's product, as well as on the less-aggressive firm's price markup and marginal cost associated with its production and green-effort choices, respectively.

Keywords: D21; L13; M14; Green effort; Bertrand equilibrium; Resale market (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056017309589
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:58:y:2018:i:c:p:259-269

DOI: 10.1016/j.iref.2018.03.025

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().