Environmental groups in monopolistic markets |
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Authors: | Pim Heijnen Lambert Schoonbeek |
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Institution: | (1) CenDEF and Department of Quantitative Economics, University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands;(2) Department of Economics, University of Groningen, P.O. Box 800, 9700 AV Groningen, The Netherlands |
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Abstract: | 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.
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Keywords: | Environmental group Environmental quality Monopolist Entry deterrence |
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