Strategic Behavior and the Environment > Vol 6 > Issue 3

Deterring the Green Revolution: Greenwash and the Threat of Green Entry

Thomas Knight, University of Florida, USA, thomas.knight@ufl.edu
 
Suggested Citation
Thomas Knight (2017), "Deterring the Green Revolution: Greenwash and the Threat of Green Entry", Strategic Behavior and the Environment: Vol. 6: No. 3, pp 181-203. http://dx.doi.org/10.1561/102.00000070

Published: 30 Mar 2017
© 2017 T. Knight
 
Subjects
Environmental Economics,  Industrial Organization:Market Structure,  Game Theoretic Models
 
Keywords
JEL Codes: D21D22
Environmental harmGreen marketingGreenwashingDuopolyMonopoly
 

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In this article:
1. Introduction
2. Existing Literature
3. A Model of Greenwashing
4. Implications for Welfare and Environmental Harm
5. Concluding Remarks
References

Abstract

This paper considers a vertically differentiated products market, in which consumers internalize the environmental harm caused by the products they consume. A brown incumbent falsely represents its product as more green than it actually is. ConsumersÂ’ beliefs regarding the harm caused by consuming the incumbentÂ’s variant determine whether a greener entrant can profitably enter the market. Greenwash by the incumbent firm can profitably increase its own market share, but it may also have important implications for market structure. I show that (1) consumers benefit from some amount of greenwash advertising, (2) greenwash advertising can reduce aggregate environmental harm when it is used to deter entry, and (3) some (small) amount of greenwash advertising may enhance total welfare. These results should inform market regulators and environmental groups that wish to combat (or facilitate) false advertising by polluting firms.

DOI:10.1561/102.00000070