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An Excessive Development of Green Products

Ana Espinola-Arredondo () and Felix Munoz-Garcia ()

No 2012-5, Working Papers from School of Economic Sciences, Washington State University

Abstract: This paper examines firms? incentives to develop a new (green) product,which might compete against the traditional pollutant (brown) product that the? firm sells. We show that in equilibrium more than one?firm might develop the green good, but such an equilibrium outcome is not necessarily efficient. In particular, we predict an excessive amount of green products under certain conditions, since fi?rms do not internalize the pro?fit loss that green goods entails on incumbent fi?rms.We? finally provide policies that help regulatory authorities promote socially optimal equilibrium outcomes.

Keywords: Excessive entry; Product differentiation; Environmental damage (search for similar items in EconPapers)
JEL-codes: C72 C93 H41 Q25 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2012-07
New Economics Papers: this item is included in nep-env
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Downloads: (external link) First version, 2012 (application/pdf)

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