In this paper we analyse the relationship between producers' ethical responsibility and consumers' welfare in a duopoly with horizontal (ethical) differentiation. We show that the entry of an ethically concerned (socially and environmentally responsible) producer generates a Pareto improvement for all (both ethically and non ethically) concerned consumers in the North in a Hotelling game in which the incumbent and the ethical entrant compete over prices and ethical features of their products. We also show that the price reaction of the incumbent when his location is fixed has additional positive welfare effects and that - when we remove the fixed location hypothesis -incumbent's ethical imitation adds to this even though it is compensated by reduced price competition. We also analyse the relative efficiency of tax financed direct aid to the South vis à vis a policy of duty exemption for i) the socially and environmentally responsible producer, ii) both producers. We therefore show under different games how changes in costs of ethical distance, ethical location of the incumbent and amount of the duty affect the relative welfare-dominance of these three different policies.
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
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
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.: