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Informative advertising by an environmental group

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  • Heijnen, P.

    () (Universiteit van Amsterdam)

Abstract

Consuming a product does not (necessarily) reveal the environmental damage of the good. In terms of environmental damage, most goods are credence goods. Therefore, through advertising and pricing the firm will not be able to transmit this information to the consumers. I examine the scope for an environmental group (EG) to signal this information to consumers via advertising and campaigning. Both the short-run (where environmental damage is given but unknown to the consumers) and the long-run (where environmental damage is chosen by the firm, but not observed by the consumers) are considered. In the short-run, Pareto-improving advertising is impossible and social welfare improving advertising is only possible if the difference between a clean product and a dirty product is sufficiently large. However, in the long-run, the presence of an EG seems to have a positive effect on social welfare. This is achieved solely by the threat of the EG to advertise if environmental damage is too high.

Suggested Citation

  • Heijnen, P., 2007. "Informative advertising by an environmental group," CeNDEF Working Papers 07-02, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  • Handle: RePEc:ams:ndfwpp:07-02
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    References listed on IDEAS

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    Cited by:

    1. Allard Made, 2014. "Information Provision by Interest Groups," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(4), pages 649-664, August.
    2. Eftichios S. Sartzetakis & Anastasios Xepapadeas & Athanasios Yannacopoulos, 2015. "Regulating the Environmental Consequences of Preferences for Social Status within an Evolutionary Framework," Working Papers 2015.34, Fondazione Eni Enrico Mattei.
    3. Allard Made & Lambert Schoonbeek, 2009. "Entry Facilitation by Environmental Groups," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(4), pages 457-472, August.
    4. Pim Heijnen & Lambert Schoonbeek, 2008. "Environmental groups in monopolistic markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(4), pages 379-396, April.

    More about this item

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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