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Green consumption and relative preferences in an international oligopoly

Author

Listed:
  • Ornella Tarola

    (MEMOTEF, University of Rome)

  • Giulia Ceccantoni

    (DISSE, University of Rome)

  • Skerdilajda Zanaj

    (CREA, Université du Luxembourg)

Abstract
We consider an open to trade North-South two-country model with two vertically differentiated goods and relative preferences in consumption. Differentiation is along an environmental quality dimension. Analyzing the equilibrium configuration, we find that the green firm obtains higher profits under relative preferences than in their absence, whereas a brown firm is penalized by them if trade is sufficiently liberalized. Moreover, under relative preferences in both countries, trade liberalization is beneficial for the green producer but detrimental for the brown rival. Importantly, this finding does not hold when these preferences are only present in the developing country where the brown good is produced. In this case, the process of trade liberali- zation can be environmentally detrimental since it can favor the brown firm in terms of profits, while penalizing the green rival.

Suggested Citation

  • Ornella Tarola & Giulia Ceccantoni & Skerdilajda Zanaj, 2016. "Green consumption and relative preferences in an international oligopoly," DEM Discussion Paper Series 16-16, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:16-16
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    Cited by:

    1. Maccarrone, Giovanni & Marini, Marco A. & Tarola, Ornella, 2023. "Shop Until You Drop: the Unexpected Effects of Anticonsumerism and Environmentalism," FEEM Working Papers 330384, Fondazione Eni Enrico Mattei (FEEM).
    2. Athanasios Lapatinas & Anastasia Litina & Skerdilajda Zanaj, 2021. "The Impact of Economic Complexity on the Formation of Environmental Culture," Sustainability, MDPI, vol. 13(2), pages 1-25, January.
    3. Ornella Tarola & skerdilajda Zanaj, 2020. "Globalization of Markets and Ethnocentrism: New Insights for the Environment," DEM Discussion Paper Series 20-18, Department of Economics at the University of Luxembourg.
    4. Ornella Tarola & Emmanuelle Taugourdeau, 2024. "Does leadership in policy setting reduce pollution and make countries better off?," Working Papers 2024-11, Center for Research in Economics and Statistics.
    5. Lapatinas, Athanasios & Litina, Anastasia & Zanaj, Skerdilajda, 2020. "Environmental Culture and Economic Complexity," MPRA Paper 105067, University Library of Munich, Germany.
    6. Lambertini, Luca & Pignataro, Giuseppe & Tampieri, Alessandro, 2020. "The effects of environmental quality misperception on investments and regulation," International Journal of Production Economics, Elsevier, vol. 225(C).
    7. Nahid Masoudi, 2021. "Greenness as a Differentiating Strategy," Mathematics, MDPI, vol. 9(11), pages 1-15, June.

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    More about this item

    Keywords

    relative preferences; green consumption; vertical differentiation; international oligopoly; trade liberalization;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • F18 - International Economics - - Trade - - - Trade and Environment
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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