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Fighting over Environmental Salience

Author

Listed:
  • Stephan Eitel
  • Stefanie Y. Schmitt

Abstract

When consumers prefer to buy goods with high environmental quality and firms differ in their environmental qualities, firms have incentives to fight over environ mental salience and thereby influence consumers’ attention to the environmental dimension of the goods. A green firm prefers environmental quality to be salient, while a brown firm prefers environmental quality to remain shrouded. We model the firms’ fight over salience as an advertising contest. We show that the firm with the competitive advantage invests more into the salience contest. Whether such a contest increases social welfare depends on the level of environmental differentiation and the marginal damage of emissions. In addition, we show that the contest is an (imperfect) substitute for emission taxes and subsidies and that minimum standards may increase emissions and decrease welfare.

Suggested Citation

  • Stephan Eitel & Stefanie Y. Schmitt, 2026. "Fighting over Environmental Salience," Working Papers 247, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:247_eitel_schmitt.rdf
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    File URL: https://www.bgpe.de/files/2026/03/DP247_final.pdf
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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