Environmental Policy in a Linear City Model of Product Differentiation
AbstractThis paper analyzes how a tax/subsidy policy affects consumers? behavior when choosing between green (pollution free goods) and conventional products and its effects on welfare when some consumers have strong preferences for green goods. We develop a three stage complete information game, using the Hotelling?s linear city model. We show that when products are identical in all respects except in their environmental properties, a tax/subsidy policy performs better than the case without policy. Our efficiency comparisons suggest that under a setting of horizontal product differentiation a tax/subsidy (either on consumers or polluting ?firms) produces higher social welfare than the absence of policy. Moreover, the proportion of consumers who prefer green products affects the welfare gains from a subsidy or tax policy.
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Bibliographic InfoPaper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2011-4.
Length: 20 pages
Date of creation: May 2011
Date of revision:
Green products; environmental policy; horizontal product differentiation;
Other versions of this item:
- Espínola-Arredondo, Ana & Zhao, Huan, 2012. "Environmental policy in a linear city model of product differentiation," Environment and Development Economics, Cambridge University Press, vol. 17(04), pages 461-477, August.
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- L5 - Industrial Organization - - Regulation and Industrial Policy
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-11 (All new papers)
- NEP-ENV-2011-06-11 (Environmental Economics)
- NEP-MKT-2011-06-11 (Marketing)
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.:
- José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
- G. F. Gori & L. Lambertini, 2012.
"Trade liberalisation between Asymmetric Countries with Environmentally Concerned Consumers,"
wp824, Dipartimento Scienze Economiche, Universita' di Bologna.
- Gori, Giuseppe Francesco & Lambertini, Luca, 2013. "Trade liberalisation between asymmetric countries with environmentally concerned consumers," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 549-560.
- Giuseppe Francesco Gori & Luca Lambertini, 2012. "Trade Liberalisation between Asymmetric Countries with Environmentally Concerned Consumers," Working Paper Series 40_12, The Rimini Centre for Economic Analysis.
- Ana Espinola-Arredondo & Felix Munoz-Garcia, 2012. "An Excessive Development of Green Products," Working Papers 2012-5, School of Economic Sciences, Washington State University.
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