Environmental groups in monopolistic markets

We examine a market in which a monopolistic firm supplies a good. The production of the good causes damage to the environment. Consumers are heterogeneous with respect to their disutility of the environmental damage. An environmental group can enter the market and set up a campaign in order to influ...

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Bibliographic Details
Published in:Environmental & resource economics 2008-04, Vol.39 (4), p.379-396
Main Authors: Heijnen, Pim, Schoonbeek, Lambert
Format: Article
Language:English
Subjects:
Activism
Advertising
Consumer behavior
Consumer preferences
Consumers
Cost analysis
Deterrence
Economic Policy
Economics
Economics and Finance
Enterprises
Entry deterrence
Environmental degradation
Environmental Economics
Environmental group
Environmental impact
Environmental Law/Policy/Ecojustice
Environmental Management
Environmental movements
Environmental organizations
Environmental quality
Equilibrium
Game theory
Market analysis
Monopolies
Monopolist
Product differentiation
Studies
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Summary:We examine a market in which a monopolistic firm supplies a good. The production of the good causes damage to the environment. Consumers are heterogeneous with respect to their disutility of the environmental damage. An environmental group can enter the market and set up a campaign in order to influence consumers' preferences. We characterize the equilibrium of the resulting entry-deterrence game and investigate its properties. It turns out that the aggregated environmental damage is lowest if the firm is able to deter entry of the environmental group and, moreover, the fixed entry cost of the environmental group is small enough.
ISSN:0924-6460
1573-1502
DOI:10.1007/s10640-007-9131-6