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Green monopoly and downward leapfrogging

Author

Listed:
  • Luca Lambertini

    (University of Bologna)

  • Andrea Mantovani

    (University of Bologna)

  • Cecilia Vergari

    (University of Pisa)

Abstract

In this paper we show that environmental consciousness may act as a substitute for environmental regulation. We consider a vertically differentiated duopoly in which the high quality firm pollutes more than the low quality rival. Consumers attach a positive value to the green firm, while stigmatizing the brown one. For relatively high values of this environmental concern, only the green firm is active in the market. When this happens, a downward leapfrogging mechanism takes place, leading to a recursive race to the bottom. At equilibrium, polluting emissions can be reduced to the level established by environmental agencies.

Suggested Citation

  • Luca Lambertini & Andrea Mantovani & Cecilia Vergari, 2021. "Green monopoly and downward leapfrogging," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(1), pages 93-103, March.
    • Handle: RePEc:spr:epolin:v:48:y:2021:i:1:d:10.1007_s40812-020-00154-x
    DOI: 10.1007/s40812-020-00154-x
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    More about this item

    Keywords

    Environmental consciousness; Relative preferences; Downward leapfrogging;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • H13 - Public Economics - - Structure and Scope of Government - - - Economics of Eminent Domain; Expropriation; Nationalization

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