Abstract
We examine a market in which a monopolistic firm supplies a good. The production of the good causes damage to the environment. Consumers are heterogeneous with respect to their disutility of the environmental damage. An environmental group can enter the market and set up a campaign in order to influence consumers’ preferences. We characterize the equilibrium of the resulting entry-deterrence game and investigate its properties. It turns out that the aggregated environmental damage is lowest if the firm is able to deter entry of the environmental group and, moreover, the fixed entry cost of the environmental group is small enough.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Arora S and Gangopadhyay S (1995). Toward a theoretical model of emissions control. J Econ Behav Organ 28: 289–309
Bagwell K (2005). The economic analysis of advertising. In: Armstrong, M and Porter, RH (eds) Forthcoming in: The handbook of industrial organization, vol 3, pp. North-Holland, Amsterdam
Bansal S and Gangopadhyay S (2003). Tax/subsidy policies in the presence of environmentally aware consumers. J Environ Econ Manage 45: 333–355
Bjørner TB, Hansen LG and Russell CS (2004). Environmental labeling and consumers’ choice—an empirical analysis of the effect of the Nordic swan. J Environ Econ Manage 47: 411–434
Bloch F and Manceau D (1999). Persuasive advertising in Hotelling’s model of product differentiation. Int J Indus Organ 17: 557–574
Brockmann KL, Hemmelskamp J and Hohmeyer O (1996). Certified tropical timber and consumer behaviour. Centre for European-Economic Research, Physica Verlag, Heidelberg, Germany
Carlton DW and Perloff JM (2005). Modern industrial organization. Pearson, Addison Wesley, Boston
Cremer H and Thisse J-F (1999). On the taxation of polluting products in a differentiated industry. Eur Econ Rev 43: 575–594
Dixit A and Norman V (1978). Advertising and welfare. Bell J Econ 9: 1–17
von der Fehr N-H and Stevik K (1998). Persuasive advertising and product differentiation. South Econ J 65: 113–126
Grossman GM and Helpman E (2001). Special interest politics. MIT Press, Cambridge, MA
Heijnen P (2007) Informative advertising by an environmental group, CeNDEF working paper 07-02, University of Amsterdam (see www1.fee.uva.nl/cendef/publications/)
Hertzendorf MN and Overgaard PB (2001). Price competition and advertising signals: signaling by competing senders. J Econ Manage Strategy 10: 621–662
Heyes AG (1997). Environmental regulation by private contest. J Public Econ 63: 407–428
Levitt SD and Dubner SJ (2005). Freakonomics. Penguin Group Ltd, London
Liston-Heyes C (2001). Setting the stakes in environmental contests. J Environ Econ Manage 41: 1–12
Maxwell JW, Lyon TP and Hackett SC (2000). Self-regulation and social welfare: the political economy of corporate environmentalism. J Law Econ 43: 583–617
Milgrom P and Roberts J (1986). Price and advertising, signals of product quality. J Political Econ 94: 796–821
Moraga-González JL and Padrón-Fumero N (2002). Environmental policy in a green market. Environ Resour Econ 22: 419–447
Teisl MF, Roe B and Hicks RL (2002). Can eco-labels tune a market? Evidence from dolphin-safe labeling. J Environ Econ Manage 43: 339–360
Tirole J (1988). The theory of industrial organization. MIT Press, Cambridge, MA
Tremblay VJ and Martins-Filho C (2001). A model of vertical differentiation, brand loyality and persuasive advertising. In: Baye, MR and Nelson, JP (eds) Advances in applied microeconomics, vol 10, pp. JAI Elsevier, Amsterdam
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License ( https://creativecommons.org/licenses/by-nc/2.0 ), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
About this article
Cite this article
Heijnen, P., Schoonbeek, L. Environmental groups in monopolistic markets. Environ Resource Econ 39, 379–396 (2008). https://doi.org/10.1007/s10640-007-9131-6
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10640-007-9131-6