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Green Leader or Green Liar? Differentiation and the role of NGOs

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Abstract

This paper addresses how corporate environmentalism can be a means of differentiation and of green-washing. Since consumers can seldom directly observe a firm's environmental quality (a problem not easily solved through eco-labeling), published environmental reports and advertising can mislead them. As a result, the role of the NGO becomes both crucial and ambiguous. On the one hand, by helping to increase consumer awareness, NGOs enlarge the market share of green differentiated firms. On the other hand, the risk that consumers will punish a firm perceived to be supplying inaccurate environmental information may bring about the paradoxical result of discouraging differentiation efforts.

Suggested Citation

  • Mireille Chiroleu-Assouline, 2010. "Green Leader or Green Liar? Differentiation and the role of NGOs," Documents de travail du Centre d'Economie de la Sorbonne 10097, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:10097
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    File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2010/10097.pdf
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    1. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
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    Keywords

    Differentiation; environmental concern; imperfect competition; quality; advertising; NGO;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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