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Green Niche Market Development

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  • Clinton Andrews
  • David DeVault

Abstract

This article introduces a multiagent simulation framework for investigating the emergence of niche markets for environmentally innovative products. It clarifies how consumer preferences, business strategy, and government policy interact during market development. The framework allows investigation of the effects of uncertainty and agents’ corresponding coping strategies. We describe the model, illustrate how it works when applied to the case of hybrid cars, and analyze results spanning several policy cases and a range of scenarios that make different assumptions about the heterogeneity of agents. Heterogeneity within each agent class strongly influences aggregate outcomes. Innovative firms can create green products in response to or in anticipation of government regulation, but true green niche markets do not emerge unless there are also green consumers. Niche markets do not go mainstream unless scale economies drive costs down to parity with conventional products. Preferred environmental innovation policies change with heterogeneity assumptions.

Suggested Citation

  • Clinton Andrews & David DeVault, 2009. "Green Niche Market Development," Journal of Industrial Ecology, Yale University, vol. 13(2), pages 326-345, April.
    • Handle: RePEc:bla:inecol:v:13:y:2009:i:2:p:326-345
    DOI: 10.1111/j.1530-9290.2009.00112.x
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    Cited by:

    1. Lone Werner & Bert Scholtens, 2017. "Firm Type, Feed-in Tariff, and Wind Energy Investment in Germany: An Investigation of Decision Making Factors of Energy Producers Regarding Investing in Wind Energy Capacity," Journal of Industrial Ecology, Yale University, vol. 21(2), pages 402-411, April.
    2. Ota, Liz & Herbohn, John & Gregorio, Nestor & Harrison, Steve, 2020. "Reforestation and smallholder livelihoods in the humid tropics," Land Use Policy, Elsevier, vol. 92(C).
    3. Chard, Chris & Mallen, Cheryl, 2012. "Examining the linkages between automobile use and carbon impacts of community-based ice hockey," Sport Management Review, Elsevier, vol. 15(4), pages 476-484.
    4. Sun, Xiaohua & Liu, Xiaoling & Wang, Yun & Yuan, Fang, 2019. "The effects of public subsidies on emerging industry: An agent-based model of the electric vehicle industry," Technological Forecasting and Social Change, Elsevier, vol. 140(C), pages 281-295.

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