Market Equilibrium in the Presence of Green Consumers and Responsible Firms: A Comparative Statics Analysis

38 Pages Posted: 26 Apr 2011

See all articles by Nicola Doni

Nicola Doni

University of Florence - Dipartimento di Scienze Economiche

Giorgio Ricchiuti

DISEI, Università degli Studi di Firenze

Date Written: February 26, 2011

Abstract

This paper analyzes how the interaction between green consumers and responsible firms affects the market equilibrium. The main result is that a higher responsibility by both producers and consumers can have different impacts on the efficiency of the firms’ abatement activity, depending on the nature of the cleaning costs. When the abatement costs are fixed, the efficiency of the clean-up effort is always increasing in their degree of responsibility. On the other hand, when the abatement costs are variable, a higher level of responsibility may reduce social welfare. Finally, the first best allocation is never reached, even in the presence of the highest credible level of responsibility of both consumers and producers.

Keywords: Green Consumers, Corporate Social Responsibility, Vertical Differentiation

JEL Classification: D62, L13, L21

Suggested Citation

Doni, Nicola and Ricchiuti, Giorgio, Market Equilibrium in the Presence of Green Consumers and Responsible Firms: A Comparative Statics Analysis (February 26, 2011). FEEM Working Paper No. 33.2011, Available at SSRN: https://ssrn.com/abstract=1823164 or http://dx.doi.org/10.2139/ssrn.1823164

Nicola Doni (Contact Author)

University of Florence - Dipartimento di Scienze Economiche ( email )

Florence 50127
Italy
++39 055 4374905 (Fax)

Giorgio Ricchiuti

DISEI, Università degli Studi di Firenze ( email )

Via delle Pandette, 9
Firenze, Florence 50127
Italy

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