On the Effect of Social Norms to Reduce Pollution
Quaderni - Working Paper DSE N° 950
31 Pages Posted: 18 Jun 2014
Date Written: June 16, 2014
We analyse how market competition in a vertically differentiated polluting industry is affected by product variants that comply at different levels with "green" social norms. A green consumption behaviour is considered as a byword of good citizenship. Consumer preferences depend on a combination of hedonic quality and compliance with the norms. Assuming that the high hedonic quality variant complies less with the norms than the low hedonic quality one, we characterize the different equilibrium configurations, depending on the perceived intensity of such norms. Then, we focus on the role that institutions may have in using these norms to reduce pollution emissions.
Keywords: social norms, Hedonic quality, environmental quality, relative preferences, vertical differentiation
JEL Classification: D62, L13, H13
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