Why is price useless to signal environmental quality ?

Alexandre Volle ()
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Alexandre Volle: Laboratoire CEE-M, Université Montpellier

No 2017.30, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: The present paper investigates the pricing behavior of a green firm competing against a brown firm where the polluting quality is sell in a perfect competitive market. The distorsion of the price to signal a green product is too high to face any demand. Pooling price equilibria emerge as most plausible as long as the brown firm has the possibility to mimic the pricing behavior of the green firm. A green producer is thus constrained to practice uninformative prices which can conduct it to leave the market.

Keywords: Environmental Quality; Asymmetric Information; Price Signaling (search for similar items in EconPapers)
JEL-codes: D43 D82 Q5 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2017-12
New Economics Papers: this item is included in nep-com, nep-ene, nep-env, nep-hme and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2017.30

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