Journal article
An excessive development of green products?
Economics of governance, Vol.17(2), pp.101-129
05/01/2016
Abstract
This paper examines firms' incentives to develop a new (green) product, which might compete against the pollutant (brown) good that they traditionally sell. We show that in equilibrium more than one firm might develop a green product, but such an equilibrium outcome is not necessarily efficient. In particular, we predict an excessive amount of green goods under certain conditions, namely, when the green product is extremely clean but both products are not sufficiently differentiated in their attributes, and when the green product is not significantly cleaner than the brown good. We finally provide policies that help regulatory authorities promote equilibrium outcomes yielding the highest social welfare.
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Details
- Title
- An excessive development of green products?
- Creators
- Ana Espinola-Arredondo - Washington State UniversityFelix Munoz-Garcia - Washington State University
- Publication Details
- Economics of governance, Vol.17(2), pp.101-129
- Academic Unit
- Economic Sciences, School of
- Publisher
- Springer Nature
- Number of pages
- 29
- Identifiers
- 99900971131401842
- Language
- English
- Resource Type
- Journal article