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An Excessive Development of Green Products

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Author Info

  • Ana Espinola-Arredondo
  • Felix Munoz-Garcia

    ()
    (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.

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File URL: http://faculty.ses.wsu.edu/WorkingPapers/AnaEspinola/WP2012-5.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2012-5.

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Length: 17 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:wsu:wpaper:espinola-13

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Related research

Keywords: Excessive entry; Product differentiation; Environmental damage;

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  1. Cason, Timothy N. & Gangadharan, Lata, 2002. "Environmental Labeling and Incomplete Consumer Information in Laboratory Markets," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 113-134, January.
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  6. Lisette Ibanez & Gilles Grolleau, 2008. "Can Ecolabeling Schemes Preserve the Environment?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(2), pages 233-249, June.
  7. Hamilton, Stephen F. & Zilberman, David, 2006. "Green markets, eco-certification, and equilibrium fraud," Journal of Environmental Economics and Management, Elsevier, vol. 52(3), pages 627-644, November.
  8. Richard Schmalensee, 1978. "Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 305-327, Autumn.
  9. Baron, David P., 2008. "Managerial contracting and corporate social responsibility," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 268-288, February.
  10. Kelvin Lancaster, 1990. "The Economics of Product Variety: A Survey," Marketing Science, INFORMS, vol. 9(3), pages 189-206.
  11. Lambertini, Luca & Tampieri, Alessandro, 2012. "Vertical differentiation in a Cournot industry: The Porter hypothesis and beyond," Resource and Energy Economics, Elsevier, vol. 34(3), pages 374-380.
  12. Cesare Dosi & Michele Moretto, 1999. "Is Ecolabelling a Reliable Environmental Policy Measure?," Working Papers 1999.9, Fondazione Eni Enrico Mattei.
  13. Mads Greaker, 2006. "Eco-labels, Trade and Protectionism," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 33(1), pages 1-37, 01.
  14. David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, 03.
  15. Besley, Timothy & Ghatak, Maitreesh, 2007. "Retailing public goods: The economics of corporate social responsibility," Journal of Public Economics, Elsevier, vol. 91(9), pages 1645-1663, September.
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