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Competitive investment in clean technology and uninformed green consumers
Institution:1. NASI Sr. Scientist, Physical Research Laboratory, Ahmedabad 380009, India;2. NASI RA, Physical Research Laboratory, Ahmedabad 380009, India;3. Indian Institute of Geomagnetism, Navi Mumbai 410218, India;4. On deputation from Airports Authority of India, Space Application Centre, Ahmedabad 380015, India;5. Space Physics Laboratory, VSSC, Trivandrum 695022, India;1. Department of Cardiology, Ogaki Municipal Hospital, Ogaki, Japan;2. Department of Cardiology, Tohno Kosei Hospital, Mizunami, Japan;3. Department of Cardiology, Nagoya University Graduate School of Medicine, Nagoya, Japan;1. Center for Agricultural and Rural Development (CARD), Iowa State University, USA;2. David D. Reh School of Business, and Institute for a Sustainable Environment, Clarkson University, USA;3. Wallace H. Coulter School of Engineering, Department of Civil & Environmental Engineering, Clarkson University, USA;1. MIT Sloan School, USA;2. Department of Economics and Harvard Kennedy School, Harvard University, The National Bureau of Economic Research, USA;1. Faculty of Economics, Ritsumeikan University, 1-1-1 Nojihigashi, Kusatsu, Shiga, 525-8577, Japan;2. Faculty of Informatics, Kansai University, 2-1-1 Ryozenjicho, Takatsuki, Osaka, 569-1052, Japan;3. Faculty of Economics, Hiroshima University, 1-3-2 Kagamiyama, Higashi-Hiroshima, Hiroshima, 739-8511, Japan
Abstract:In a market where consumers and the regulatory authorities are not fully informed about the actual production technology or environmental performance of firms that engage in strategic competition, I study the effect of environmental consciousness of consumers on firms? incentive to invest in cleaner technology. Firms compete in prices and may signal their environmental performance to uninformed consumers through prices. I also analyze the effect of an expected liability on firms in this setting. Compared to full information, incomplete information generates higher strategic incentive to invest in cleaner technology particularly when consciousness and/or expected liability are not too high. Requiring mandatory disclosure of technology or environmental performance may discourage such investment. Even though consumers and the regulator are uninformed, competition has a positive effect (relative to monopoly) on the incentive to invest.
Keywords:Duopoly  Environmental consciousness  Environmental regulation  Incomplete information  Investment  Mandatory disclosure  Signaling
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