Carbon Footprinting and Pricing Under Climate Concerns
28 Pages Posted: 30 Jun 2019 Last revised: 3 Jul 2019
Date Written: June 28, 2019
This paper studies how marketers should design and price a product in the face of climate concerns. We first derive the profit-maximizing carbon footprint and price, and examine how these respond to stronger climate concerns by consumers. Next, we consider the impact of product-level decisions on the carbon emissions of the firm as a whole. Interestingly, we find that a firm can become a victim of its own success, as a greener product may boost sales to the point that overall emissions also increase. Finally, we analyze how government regulation in the form of a cap-and-trade scheme or a carbon tax affects product design and pricing, firm profitability, and the adoption of green technologies.
Keywords: Green marketing, product design, organizational carbon footprint, carbon regulation
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