Marini, Marco A. Tarola, Ornella Thisse, Jacques-François
Year of Publication:
Working Paper No. 031.2020
We study how the supply of environmentalism, which is defined by psychic benefits (costs) associated with the purchase of high-environmental (low-environmental) qualities, a¤ects the way firms choose their products and the ensuing consequences for the global level of pollution. Contrary to general belief, a high supply of environmentalism does not give rise to a better environmental outcome because it endows firms with more market power which they use to maximize profits. By contrast, standard policy instruments such as a minimum quality standard or the use of greener technologies leads to a better ecological footprint.
Environmentalism Psychic Costs and Benefifits Vertical Product Differentiation Environmental Policy