Consumer's Environmental Awareness and the Role of (Green) Entrepreneurship: Lessons from Environmental Quality Competition and R&D Activities for Environmental Policy
AbstractIn the recent last years, in particular in the aftermath of the global financial and economic crisis, many countries initiated economic recovery plans with a major focus on stimulating green entrepreneurial activities to revive economic growth. Further, the recovery plans intend to improve a country's awareness for a direct orientation towards (strong) sustainability and green growth. Before discussing strategies towards green growth, in this paper we propose a novel framework to increase our understanding of the interplay of process R&D activities, the strategic price and environmental quality setting of heterogeneous entrepreneurs in a market where consumers feel up to paying for environmental quality improvement of a vertically differentiated good. In the paper we decompose an entrepreneur's incentive conducting process R&D in four parts. In particular we show that an entrepreneur's incentive of conducting own process R&D is reduced due to the existence of knowledge-spillovers. Moreover, due to the strategic complementarities, both in prices as well as in environmental quality, a strategic effect reinforces the negative consequences of the spillover-effect. We show that the externalities in the model require corrections based upon a mixture of fiscal policies and a process R&D subvention scheme establishing a first-best solution. We further thoroughly discuss the implementation of a second-best solution and derive environmental policy implications.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Universitaet Augsburg, Institute for Economics in its series Discussion Paper Series with number 321.
Date of creation: Jan 2013
Date of revision:
Contact details of provider:
Postal: Universitaetsstrasse 16, D-86159 Augsburg, Germany
Phone: +49 821 598 4060
Fax: +49 821 598 4217
Web page: http://www.wiwi.uni-augsburg.de/vwl/institut
More information through EDIRC
Technological change; Process R&D; Green consumerism; Vertical differentiation; Emission tax; Environmental quality; Environmental policy;
Find related papers by JEL classification:
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-26 (All new papers)
- NEP-COM-2013-01-26 (Industrial Competition)
- NEP-ENE-2013-01-26 (Energy Economics)
- NEP-ENT-2013-01-26 (Entrepreneurship)
- NEP-ENV-2013-01-26 (Environmental Economics)
- NEP-INO-2013-01-26 (Innovation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, October.
- Mario Pianta & Andrea Vaona, 2006.
"Firm size and Innovation in European Manufacturing,"
Kiel Working Papers
1284, Kiel Institute for the World Economy.
- Andrea Vaona & Mario Pianta, 2008. "Firm Size and Innovation in European Manufacturing," Small Business Economics, Springer, vol. 30(3), pages 283-299, March.
- Stephen Hammer & Lamia Kamal-Chaoui & Alexis Robert & Marissa Plouin, 2011. "Cities and Green Growth: A Conceptual Framework," OECD Regional Development Working Papers 2011/8, OECD Publishing.
- Aghion, P. & Howitt, P., 1989.
"A Model Of Growth Through Creative Destruction,"
527, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
- Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
- Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
- Luca LAMBERTINI & Raimondello ORSINI, 2005.
"Positional effects, product quality and regulation in duopoly,"
Discussion Papers (REL - Recherches Economiques de Louvain)
2005041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Luca Lambertini & Raimondello Orsini, 2005. "Positional effects, product quality and regulation in duopoly," Recherches économiques de Louvain, De Boeck Université, vol. 71(4), pages 367-381.
- Aidt, Toke S., 1998. "Political internalization of economic externalities and environmental policy," Journal of Public Economics, Elsevier, vol. 69(1), pages 1-16, July.
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, October.
- Dorothée Brécard, 2011.
"Environmental Tax in a Green Market,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 49(3), pages 387-403, July.
- Jürgen Antony & Torben Klarl & Alfred Maußner, 2010.
"Firm Heterogeneity, Credit Constraints, and Endogenous Growth,"
DEGIT Conference Papers
c015_045, DEGIT, Dynamics, Economic Growth, and International Trade.
- Jürgen Antony & Torben Klarl & Alfred Maußner, 2012. "Firm heterogeneity, credit constraints, and endogenous growth," Journal of Economics, Springer, vol. 105(3), pages 199-224, April.
- Torben Klarl & Alfred Maussner, 2010. "Firm Heterogeneity, Credit Constraints, and Endogenous Growth," Discussion Paper Series 311, Universitaet Augsburg, Institute for Economics.
- Zoltan Acs & David Audretsch, 1990. "Innovation and Small Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011131, December.
- Dorothée Brécard, 2008. "Une note sur la taxation ad valorem des produits polluants sur un marché vert," Revue économique, Presses de Sciences-Po, vol. 59(3), pages 487-496.
- David B. Audretsch, 2007. "From small business promotion to creating an entrepreneurial society," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 8(2), pages 3-6, 07.
- Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-31, June.
- Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, vol. 78(4), pages 678-90, September.
- Symeonidis, George, 2003.
"Comparing Cournot and Bertrand equilibria in a differentiated duopoly with product R&D,"
International Journal of Industrial Organization,
Elsevier, vol. 21(1), pages 39-55, January.
- George Symeonidis, 2002. "Comparing Cournot and Bertrand Equilibria in a Differentiated Duopoly with Product R&D," Economics Discussion Papers 539, University of Essex, Department of Economics.
- Lin, Ping & Saggi, Kamal, 2002. "Product differentiation, process R&D, and the nature of market competition," European Economic Review, Elsevier, vol. 46(1), pages 201-211, January.
- José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
- Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.
- G. Ecchia & L. Lambertini, 1998. "Market Coverage and the Existence of Equilibrium in a Vertically Differentiated Duopoly," Working Papers 311, Dipartimento Scienze Economiche, Universita' di Bologna.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Dorothée Brécard, 2013. "Environmental Quality Competition and Taxation in the Presence of Green Network Effect Among Consumers," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 54(1), pages 1-19, January.
- Klaus Conrad, 2005. "Price Competition and Product Differentiation When Consumers Care for the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 1-19, 05.
- C. Lombardini-Riipinen, 2005. "Optimal Tax Policy under Environmental Quality Competition," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(3), pages 317-336, November.
- Eriksson, Clas, 2004. "Can green consumerism replace environmental regulation?--a differentiated-products example," Resource and Energy Economics, Elsevier, vol. 26(3), pages 281-293, September.
- Toshimitsu, Tsuyoshi, 2003. "Optimal R&D policy and endogenous quality choice," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1159-1178, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr. Albrecht Bossert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.