رقابت کیفی زیست محیطی و برچسب زدن کشورهای عضو اکو

A three-stage game of investment, environmental quality provision and price competition is developed to study the impact of green technology investment (eco-labeling), in a duopoly model of vertical product differentiation. The firms’ incentives to invest in green technologies depend on their relative cost structure. When firms are identical with respect to fixed costs, both firms will always invest, but if one firm is more efficient in investing, then the other firm may or may not invest depending on the level of unit cost of investment. Quality competition will be tighter when the low-quality firm is more efficient, and looser when the high-quality firm is more efficient in investing. Socially optimal investment for both firms is always positive, but lower than in the duopoly solution. In the absence of environmental externalities, the quality dispersion chosen by profit maximizing firms may be too high or too low, while environmental externalities increase the possibility low-quality dispersion that is too low within the market solution. Finally, and importantly, ecolabeling can be used as a means of reducing excessive investment and increasing environmental quality that is too low.

Consumer preference to purchase from “green” firms is well established and often revealed through increased willingness to pay for products viewed as “clean,” i.e., produced with environmentally friendly production or abatement technologies such as recycling and use of less polluting inputs. From a polluting firm's perspective, there may be strong incentives to invest in these technologies if public opinion becomes more favorable toward the firm, or if the firm can use its investment as a way of differentiating its product. Investment in environmentally clean technologies has recently given firms the right to attach a specific “ecolabel” to their product. Well-known examples include dolphin-safe tuna, green electricity, recycling in production processes, organic food production, and production of biodegradable washing powders (e.g., see [26] and [34] for a review of ecolabeling and related green technology investments). Such ecolabels are potentially important strategic variables for firms, serving to differentiate a firm's product from those produced by firms that do not make the necessary green investments. This suggests that environmental quality competition might be studied within the framework of product quality models. These models usually follow a duopoly framework under the assumption of vertical product differentiation. Another common assumption is that firms compete in two stages, first by choosing product quality, and then by choosing prices for their (quality-differentiated) products. The quality competition literature omits one crucial component of existing eco-labeling systems, namely investment.1 Current ecolabeling systems, such as Green Seal in the United States, the Nordic Swan in Scandinavia, the European Union Eco-Label Award Scheme, the Blue Angel in Germany or the Japanese Eco-Mark, are usually designed to cover from 5 to 20% of the market. The license to use the ecolabel is quite often limited to a relatively short period of time. What is most important, however, is the fact that the criteria for ecolabeling rights are revised, i.e. tightened, on average every 3 or 4 years (for a representation of these and other eco-labeling schemes, see [27]). This feature of ecolabeling systems implies that any firm, wishing to provide high enough environmental quality to secure an ecolabel, is forced to make investments to improve quality (and to reduce the costs of quality production). High provision of environmental quality therefore requires some combination of new advanced abatement technologies and increased abatement efforts. These investments are typically costly in terms of either the capital outlays required or the auditing and license costs incurred by the firms. Understanding the inherent dynamics of ecolabeling schemes requires an investigation of firms’ investment decisions, and the role of this investment to competition and product differentiation. The purpose of this paper is to examine eco-labeling within a vertically differentiated market model. To capture features of ecolabeling discussed above, we extend the usual duopoly model of vertical product differentiation with variable costs and full market coverage by including an initial technology investment stage. This allows us to compare socially optimal levels of investments and environmental qualities with those that result from profit maximization.2 In addition, we study how externalities, associated with inefficient average environmental quality, affect socially optimal provision of environmental quality. Finally, utilizing an approach used to study the role of advertising in the industrial organization literature [15], we extend the model by allowing consumer willingness to pay to depend on investments made by firms. We show that firms’ incentives to invest in technologies (and obtain ecolabels) depend crucially on the differences in cost structures between firms. When firms are identical with respect to fixed costs, both firms will always invest in the green technology. If the high-quality firm is more efficient at the margin in investing, then it invests, but the low-quality firm may or may not invest depending on the unit cost of investment. The opposite holds if the low-quality firm is more efficient at investing. These different incentives to invest lead to strikingly different outcomes for the provision of environmental quality in markets. In fact, quality competition will be more intense when the low-quality firm is more efficient at investment, and less intense when the high-quality firm is more efficient at investment. Between these extremes, i.e., when the firms are equally efficient in investing, we arrive at results obtained in the basic two-stage model of quality competition by Crampes and Hollander [12].3 Thus, the two-stage model of price and quality competition between identical firms is simply a special case of our three-stage model. Relative to the social optimum, previous work demonstrates that duopolists usually over-invest in order to mitigate price competition. In the absence of externalities, if the firms have identical cost structures, we find that quality dispersion between products chosen by profit maximizing firms is too high, but average quality is too low from the viewpoint of social welfare. But if the high-quality firm is more efficient in investment, then quality dispersion and average quality are both too low. This is because the high-quality firm may underprovide environmental quality, while the low-quality firm always under-provides environmental quality. This possibility for underproviding high quality is increased by the presence of environmental externalities. These findings represent an important departure from the two-stage quality competition literature. For our problem here, they imply that eco-labeling can be used as a means of reducing excessive investment and increasing environmental quality. The rest of the paper is structured as follows. In Section 2 we develop a duopoly model of vertical product differentiation to analyze price, quality and investment decisions. In Section 3 we examine the social welfare optimum and compare it with the profit-maximizing solution, and in Section 4 we introduce the presence of a quality externality into the social welfare function. Finally, in Section 5 we offer our conclusions.

In most market settings, considerable emphasis has been placed on understanding investments firms make in “clean” technologies that can reduce pollution associated with production. At the same time there have been numerous empirical examples of firms obtaining the right to eco-label their goods. In its purest sense, eco-labeling provides firms with a means of differentiating products. Eco-labeling often induces or effectively requires firms to adopt green technologies, because these reduce the costs of providing high levels of environmental quality required to obtain or continue holding eco-labeling rights. Thus, to understand incentives for firms to achieve high environmental quality of their production processes and receive eco-labels, and to identify the socially optimal level of environmental quality in markets where goods are not homogenous in quality, we must first understand how firms make investment choices when products can be differentiated. We therefore extend vertical product differentiation literature to incorporate a firm's choice of technology investment, which is made prior to environmental quality and price competition decisions. A Nash game is solved over three stages: in the first stage, each firm chooses the level of their technology investment, in the second stage firms choose their environmental quality levels conditional on this investment, and the third stage has the firms competing in product markets. The resulting duopoly solution is then compared to the socially first best solution, in cases where externalities are absent and present, and where consumer willingness to pay does and does not depend on firms’ investments in technologies. We showed firms’ incentives to invest in technologies that can be used to provide increased environmental quality at lower costs, and can allow the firm to obtain and retain eco-labels, depend critically on differences in their cost structures. If firms are identical with respect to fixed costs of investment, then both firms will always invest in green technologies. If the high-quality firm is more efficient at investing, then the low-quality firm may or may not invest depending on the unit cost of investment. The opposite holds if the low-quality firm is more efficient in investing. We have also shown that market-driven incentives for high-quality firms to invest are reinforced if technology investment increases consumer marginal willingness to pay for environmental quality; but this is not true for a low-quality firm. One of our most important findings is that the incentives to invest and the possibilities of corner solutions in investment differ depending on the efficiency of investment across firms. The differences in incentives to invest lead to different outcomes for the provision of environmental quality in a market. Surprisingly, quality competition will be highest among firms when the low-quality firm is more efficient in investing. Quality competition is lowest when the high-quality firm is more efficient in investing. Between these cases, i.e., when the firms are equally efficient in investment, we arrive at the basic results of quality competition characterized by Crampes and Hollander [12]. Our model therefore generalizes the vertical differentiation literature. We have also compared the duopoly outcome with the socially optimal one. According to our results the possibility of a corner solution in investment never occurs at the social optimum. In the absence of environmental externalities, the quality dispersion and average quality chosen under the profit-maximizing firms again depends on their relative efficiency in investment. If the high-quality firm in more efficient in investing, then both firms underprovide quality. Interestingly, the presence of environmental externalities increases the possibility of underprovision in cases where the firms have identical cost structures, or where the low-quality firm is more efficient in investing. Our analysis has potentially important implications for a government targeting the eco-labeling behavior of firms. Eco-labeling, by changing the firms’ effective unit cost of investment, might be used to achieve the dual goal of reducing excessive investments and increasing average environmental quality, both in the absence and presence of externalities related to low average environmental quality. For example, a government interested in achieving a desired environmental quality target in markets where eco-labeling exists can use eco-labeling criteria and auditing/license charges as a means of decreasing the types of excessive investments we show could exist. However, the ability of the government to do this depends on the difference in cost structure between the firms, i.e., which firm is more efficient in terms of the effects of investment on its costs. It is worth noting that we have conducted our analysis assuming consumers can observe the investment levels of firms, and firms can observe the preferences of consumers. An interesting area for further research would be to allow for asymmetric information between firms and consumers regarding environmental qualities of firms’ products. This would require modeling of eco-labeling as a signal for consumers.