Market Equilibrium in the Presence of Green Consumers and Responsible Firms: a Comparative Statics Analysis.

Nicola Doni, Giorgio Ricchiuti (2013) Resource And Energy Economics, vol. 35, pp. 380-395,

Abstract: This paper analyzes how the interaction between green consumers and responsible firms affects the market equilibrium. The main result is that a higher degree of responsibility of consumers and/or firms may both increase and decrease the total abatement and the social welfare. In general an increment in the degree of CSR of a firm entails an increase of its total clean-up and a reduction of the aggregate abatement of its rival. When the rival firm has a high degree of CSR this second effect is stronger than the first and total abatement falls down. At the same time, when the degree of consciousness of consumers and/or firms is very high, responsible firms overprovide environmental quality: in such case a further increment in the level of social responsibility of a market actor may trigger an increase of firms’ total clean-up but a reduction in social welfare.

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