Strategic Behavior and the Environment > Vol 1 > Issue 1

Good and Bad Increases in Ecological Awareness: Environmental Differentiation Revisited

Aurora García-Gallego, LEE, Economics Dept., Universitat Jaume I, Spain, Nikolaos Georgantzís, GLOBE, Economics Dept., Universidad de Granada, Spain,
Suggested Citation
Aurora García-Gallego and Nikolaos Georgantzís (2010), "Good and Bad Increases in Ecological Awareness: Environmental Differentiation Revisited", Strategic Behavior and the Environment: Vol. 1: No. 1, pp 71-88.

Published: 07 Oct 2010
© 2010 A. García-Gallego and N. Georgantzís
Decision Making
Vertical differentiationWTP for green productsEnvironmental awareness campaigns

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In this article:
The Model
Extensions — Generalizations


We analyze a vertically differentiated market, assuming that conventional and green firms' products have different impacts on the environment. Heterogeneous consumers choose to be supplied by a conventional or a green firm, depending on their extra willingness to pay for a green product and the relative prices of the products in the market. We show that environmental awareness campaigns may have a negative impact on total welfare. This possibility is shown to exist without consumer misperceptions about the quality of green products and ruling out changes in the coverage and the structure of the market. Surprisingly, both conventional and green firms may benefit from heterogeneity-enhancing awareness campaigns, while social welfare is more likely to be enhanced by heterogeneity-reducing ones.