Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/319885 
Year of Publication: 
2025
Series/Report no.: 
BERG Working Paper Series No. 207
Publisher: 
Bamberg University, Bamberg Economic Research Group (BERG), Bamberg
Abstract: 
We investigate the impact of an environmental award in a Bertrand duopoly with green consumers considering a three-stage game. First, the regulator designs the environmental contest. Second, firms choose their green investments, and the winner of the contest is awarded. Third, firms compete in prices, and consumption takes place. We illustrate that the award not only incentivizes green investments and may thus reduce environmental externalities. As consumers perceive the product of the awarded firm to be of superior quality, it also gives rise to vertical product differentiation. This induces market power, and thus anti-competitive effects: Rents shift from consumers to producers, and consumer surplus may decrease, particularly if marginal investment costs in green technologies are high compared to the strength of environmental damage.
Subjects: 
Bertrand Competition
Contests
Environmental Award
Green Consumer
Product Differentiation
JEL: 
D43
H23
L13
L51
Q52
Q58
Document Type: 
Working Paper

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