Klaus Conrad (Institut für Volkswirtschaft und Statistik (IVS))
Abstract
The objective of our approach is to develop a model which captures horizontal product differentiation under environmental awareness, product innovation under network effects, and price competition whereby environmentally friendly products are costlier to produce. As an example, we refer to automobile producers, offering cars with a gasoline powered engine and one with a natural gas powered engine. The network of petrol stations provide the complementary good. The fulfilled expectation equilibrium could be one with either the firm offering the conventional engine as the only producer, or one with the firm offering the new technology as the only producer, or one where both firms share the market. Which equilibrium will emerge depends on the cost of producing energy efficient engines and on environmental awareness of the consumers. Due to the latter aspect the innovative firm has a chance to enter the market. We use a two stage game in prices and characteristics to analyse the respective market structure. We show that if environmental awareness is strong, the firm with the conventional technology will improve energy efficiency of its product. If the network effect is weak, both firms will be in the market. Prices and profits will decline if the role of the network effect becomes important.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Institut für Volkswirtschaft und Statistik (IVS), University of Mannheim in its series IVS discussion paper series with number
612.
Length: Date of creation: Date of revision: Handle: RePEc:mea:ivswpa:612
Contact details of provider: Postal: Institut für Volkswirtschaft und Statistik, L7, 3-5, Room 408, University of Mannheim, 68131 Mannheim Phone: +49/621/181.1861 Fax: +49/621/181.1863 Web page: http://www.vwl.uni-mannheim.de/institut
For technical questions regarding this item, or to correct its listing, contact: (Samir Chaturvedi).
Related research
Keywords:
Other versions of this item:
Find related papers by JEL classification: L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy) H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
This paper has been announced in the following NEP Reports:
References listed on IDEAS 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.:
Nicholas Economides, 1995.
"The Economics of Networks,"
Working Papers
94-24, New York University, Leonard N. Stern School of Business, Department of Economics, revised Sep 1995.
[Downloadable!]