Hedonic Quality and Social Norms: A Hybrid Model of Product Differentiation

Quaderni - Working Paper DSE N° 1029

35 Pages Posted: 22 Sep 2015

See all articles by Andrea Mantovani

Andrea Mantovani

University of Bologna

Ornella Tarola

University of Rome I

Cecilia Vergari

University of Bologna - Department of Economics

Date Written: September 22, 2015

Abstract

We analyse how strategic competition between a green firm and a brown competitor develops when their products are differentiated along two dimensions: hedonic quality and environmental quality. The former dimension refers to the pure (intrinsic) performance of the good, whereas the latter dimension has a positional content: buying green goods satisfies the consumers’ desire to be socially worthy citizens. Product variants thus comply at different levels with "green" social norms. Consumer preferences depend on a combination of hedonic quality and compliance with social norms. Assuming that the high hedonic quality variant complies less with these norms than the low hedonic quality variant, we characterize different equilibrium configurations which appear as a result of both the intensity of such norms and the willingness to pay for the hedonic quality. Afterwards, we discuss the policy implications of our analysis.

Keywords: Hedonic quality, environmental quality, relative preferences

JEL Classification: D62, L13, H13

Suggested Citation

Mantovani, Andrea and Tarola, Ornella and Vergari, Cecilia, Hedonic Quality and Social Norms: A Hybrid Model of Product Differentiation (September 22, 2015). Quaderni - Working Paper DSE N° 1029. Available at SSRN: https://ssrn.com/abstract=2663917 or http://dx.doi.org/10.2139/ssrn.2663917

Andrea Mantovani (Contact Author)

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy

Ornella Tarola

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

Cecilia Vergari

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

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