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An Excessive Development of Green Products

Author

Listed:
  • 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.

Suggested Citation

  • Ana Espinola-Arredondo & Felix Munoz-Garcia, 2012. "An Excessive Development of Green Products," Working Papers 2012-5, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:espinola-13
    as

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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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    References listed on IDEAS

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    Cited by:

    1. Begoña Casino & Lluís M. Granero, 2021. "Green products, market structure, and welfare," Journal of Economics, Springer, vol. 134(2), pages 103-125, October.

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    More about this item

    Keywords

    Excessive entry; Product differentiation; Environmental damage;
    All these keywords.

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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