Good and Bad Increases in Ecological Awareness: Environmental Differentiation Revisited

García-Gallego, Aurora and Georgantís, Nikolaos
Authors registered in the RePEc Author Service: Aurora García-Gallego

Strategic Behavior and the Environment, 2010, vol. 1, issue 1, 71-88

Abstract: We analyze a vertically differentiated market, assuming that conventional and green firms' products have different impacts on the environment. Heterogeneous consumers choose to be supplied by a conventional or a green firm, depending on their extra willingness to pay for a green product and the relative prices of the products in the market. We show that environmental awareness campaigns may have a negative impact on total welfare. This possibility is shown to exist without consumer misperceptions about the quality of green products and ruling out changes in the coverage and the structure of the market. Surprisingly, both conventional and green firms may benefit from heterogeneity-enhancing awareness campaigns, while social welfare is more likely to be enhanced by heterogeneity-reducing ones.

Keywords: Vertical differentiation; WTP for green products; Environmental awareness campaigns (search for similar items in EconPapers)
JEL-codes: A13 D43 D62 L13 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlsbe:102.00000001

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