An Excessive Development of Green Products
AbstractThis 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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Bibliographic InfoPaper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2012-5.
Length: 17 pages
Date of creation: Jul 2012
Date of revision:
Excessive entry; Product differentiation; Environmental damage;
Find related papers by 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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