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Why is price useless to signal environmental quality ?

Author

Listed:
  • Alexandre Volle

    (Laboratoire CEE-M, Université Montpellier)

Abstract

The present paper investigates the pricing behavior of a green firm competing against a brown firm where the polluting quality is sell in a perfect competitive market. The distorsion of the price to signal a green product is too high to face any demand. Pooling price equilibria emerge as most plausible as long as the brown firm has the possibility to mimic the pricing behavior of the green firm. A green producer is thus constrained to practice uninformative prices which can conduct it to leave the market.

Suggested Citation

  • Alexandre Volle, 2017. "Why is price useless to signal environmental quality ?," Working Papers 2017.30, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2017.30
    as

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    File URL: http://faere.fr/pub/WorkingPapers/Volle_FAERE_WP2017.30R.pdf
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    File URL: http://faere.fr/pub/WorkingPapers/Volle_FAERE_WP2017.30R2.pdf
    File Function: Revised version, April 2019
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    References listed on IDEAS

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    More about this item

    Keywords

    Environmental Quality; Asymmetric Information; Price Signaling;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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