Entry Facilitation by Environmental Groups

Allard van der Made*, Lambert Schoonbeek

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

6 Citations (Scopus)

Abstract

We consider a model of vertical product differentiation where consumers care about the environmental damage their consumption causes. An environmental group is capable of increasing consumers' environmental concern via a costly campaign. We show that the prospect of such a campaign can induce entry by a firm that is able to employ a cleaner technology than the one used by the incumbent. We further demonstrate that the subsequent competition can lead to an adverse effect on aggregate pollution, i.e. the decline in average industry pollution per product is offset by the increase in aggregate production.

Original languageEnglish
Pages (from-to)457-472
Number of pages16
JournalEnvironmental & Resource Economics
Volume43
Issue number4
DOIs
Publication statusPublished - Aug-2009

Keywords

  • Entry
  • Environmental groups
  • Persuasive advertising
  • Vertical product differentiation
  • VERTICAL PRODUCT DIFFERENTIATION
  • SOCIAL-WELFARE
  • QUALITY
  • DETERRENCE
  • MARKETS
  • MODEL

Cite this