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Good and Bad Increases in Ecological Awareness: Environmental Differentiation Revisited

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  • García-Gallego, Aurora
  • Georgantís, Nikolaos

Abstract

We analyze a vertically differentiated market, assuming that conventional and green firms' products have different impacts on the environment. Heterogeneous consumers choose to be supplied by a conventional or a green firm, depending on their extra willingness to pay for a green product and the relative prices of the products in the market. We show that environmental awareness campaigns may have a negative impact on total welfare. This possibility is shown to exist without consumer misperceptions about the quality of green products and ruling out changes in the coverage and the structure of the market. Surprisingly, both conventional and green firms may benefit from heterogeneity-enhancing awareness campaigns, while social welfare is more likely to be enhanced by heterogeneity-reducing ones.

Suggested Citation

  • García-Gallego, Aurora & Georgantís, Nikolaos, 2010. "Good and Bad Increases in Ecological Awareness: Environmental Differentiation Revisited," Strategic Behavior and the Environment, now publishers, vol. 1(1), pages 71-88, October.
    • Handle: RePEc:now:jnlsbe:102.00000001
    DOI: 10.1561/102.00000001
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    More about this item

    Keywords

    Vertical differentiation; WTP for green products; Environmental awareness campaigns;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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