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Hedonic vs Environmental Quality: Which Policy Can Help in Lowering Pollution Emissions?

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  • A. Mantovani
  • C. Vergari

Abstract

In this paper we compare two policy instruments that can be adopted to curb carbon emissions. The first is a conventional pollution tax. The second is an environmental campaign aiming to influence consumers to switch to a green good. We consider two different scenarios. When consumers are characterized by hedonic quality preferences, in this case the pollution tax is more efficient than the campaign. On the contrary, when consumers develop environmental quality preferences, there are cases in which the campaign is preferred. To sum up, while both policy instruments are effective in reducing pollution emissions, their efficiency viewed from a welfare perspective crucially depends on consumers' environmental awareness.

Suggested Citation

  • A. Mantovani & C. Vergari, 2013. "Hedonic vs Environmental Quality: Which Policy Can Help in Lowering Pollution Emissions?," Working Papers wp906, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:wp906
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    References listed on IDEAS

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    1. Eftichios Sartzetakis & Anastasios Xepapadeas & Emmanuel Petrakis, 2012. "The Role of Information Provision as a Policy Instrument to Supplement Environmental Taxes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 52(3), pages 347-368, July.
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    3. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    4. José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
    5. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
    6. Joseph Cavanaugh & Michelle Alexopoulos, 2006. "Exploring the Behavior of Economic Agents: the role of relative preferences," Economics Bulletin, AccessEcon, vol. 12(2), pages 1-7.
    7. Aurora García-Gallego & Nikolaos Georgantzís, 2009. "Market Effects of Changes in Consumers' Social Responsibility," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 235-262, March.
    8. repec:ebl:ecbull:v:4:y:2008:i:34:p:1-10 is not listed on IDEAS
    9. nada, BELHADJ & GABSZEWICZ, Jean J. & TAROLA, Ornella, 2013. "Social awareness and duopoly competition," CORE Discussion Papers 2013043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. C. Lombardini-Riipinen, 2005. "Optimal Tax Policy under Environmental Quality Competition," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(3), pages 317-336, November.
    11. Hend GHAZZAI, 2008. "Multi-product strategies and relative preferences for quality," Economics Bulletin, AccessEcon, vol. 4(34), pages 1-10.
    12. Matthew E. Kahn & Matthew J. Kotchen, 2010. "Environmental Concern and the Business Cycle: The Chilling Effect of Recession," NBER Working Papers 16241, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Andrea Mantovani & Ornella Tarola & Cecilia Vergari, 2014. "Hedonic quality, social norms, and environmental campaigns," Working Papers 2014/36, Institut d'Economia de Barcelona (IEB).
    2. A. Mantovani & O. Tarola & C. Vergari, 2014. "On the effect of social norms to reduce pollution," Working Papers wp950, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. A. Mantovani & O. Tarola & C. Vergari, 2015. "Hedonic Quality and Social Norms: a hybrid model of product differentiation," Working Papers wp1029, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Mantovani, Andrea & Tarola, Ornella & Vergari, Cecilia, 2016. "Hedonic and environmental quality: A hybrid model of product differentiation," Resource and Energy Economics, Elsevier, vol. 45(C), pages 99-123.

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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