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Environmental Policy, Firm Location, And Product Differentiation: The Role of Green Preferences and Inter-firm Pollution

Author

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  • Kuhn, Michael

Abstract

Endogenous firm location is analyzed in a discrete two-region-two-firm model of product differentiation. In a non-cooperative game, two regional governments first decide on the imposition (or lifting) of domestic production standards; firms then choose technology (clean or polluting), location and price. Equilibrium quality and location structure are determined analytically. The existence of consumers willing to pay a premium on clean production methods, and the possibility of inter-firm pollution alleviate the tendency of firms to delocate into the region with the weaker regulation; then, a deregulatory race to the bottom is less likely.

Suggested Citation

  • Kuhn, Michael, 1997. "Environmental Policy, Firm Location, And Product Differentiation: The Role of Green Preferences and Inter-firm Pollution," Thuenen-Series of Applied Economic Theory 06, University of Rostock, Institute of Economics.
    • Handle: RePEc:zbw:roswps:06
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    File URL: https://www.econstor.eu/bitstream/10419/78262/1/wp006thuenen.pdf
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    Cited by:

    1. Kuhn, Michael & Tivig, Thusnelda, 1996. "Ecological dumping and environmental capital flight: The economics behind the propaganda," Discussion Papers, Series II 324, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".

    More about this item

    Keywords

    environmental policy; product differentiation; firm location; institutional competi-tion; green preferences;
    All these keywords.

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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