Product Sustainability and Consumer Environmental Awareness in Differentiated Markets

Hamid Hamoudi () and Carmen Avilés-Palacios ()
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Hamid Hamoudi: Universidad Rey Juan Carlos-URJC, Paseo Artilleros S/N
Carmen Avilés-Palacios: Forestal y del Medio Natural – Universidad Politécnica de Madrid-UPM

International Advances in Economic Research, 2023, vol. 29, issue 4, No 5, 277-291

Abstract: Abstract Sustainable management of natural stock resources can be promoted through state intervention. This study investigates optimal regulatory strategies to mitigate the negative environmental effects of human activities within a duopolistic, differentiated linear market à la Hotelling framework. The analysis is conducted from both a business and a social perspective, aiming to elucidate the role of regulatory interventions, awareness campaigns, and sustainable production characteristics in shaping firm behavior and market outcomes. Under the business perspective, a game-theoretical approach is employed, involving the regulator and two competing firms. The equilibrium in prices and production characteristics is derived, revealing how firms respond to sustainable characteristics and awareness campaigns. In the social perspective, where the regulator has complete control, optimal strategies are determined to maximize social welfare, resulting in reduced differentiation and enhanced sustainability. This study identifies the optimal level of awareness campaign and sustainable characteristic proposed by the regulator. The findings highlight the significance of coordinated regulatory policies and awareness campaigns to induce firms toward more sustainable practices, ultimately contributing to a more ecologically balanced market. The study offers insights for policymakers and practitioners seeking effective strategies to address environmental concerns in differentiated markets, thereby promoting sustainable economic growth and reducing ecological impacts.

Keywords: Spatial competition; Environmental awareness; Sustainability; Regulation (search for similar items in EconPapers)
JEL-codes: C72 D43 H23 L11 Q38 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11294-023-09881-y

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