A1066
Title: On green reputation
Authors: Francisco Cabo - Universidad de Valladolid (Spain) [presenting]
Mercedes Molpeceres-Abella - Universidad de Valladolid (Spain)
Abstract: The dynamic interaction between a standard brown firm and a green firm with less pollution, though more costly production technology, is analyzed. Consumers are willing to pay a premium price for green goods, whose size depends on the green firm's reputation. Reputation is measured by a state variable that grows with the technology gap between green and brown production, as well as with the green firms' advertising, representing green-washing. Production activities generate emissions accumulated as a pollution stock. The brown producer only determines the produced quantity, while the green producer also has to determine the level of green technology and the investment in green advertising. The solutions are characterized and compared with and without the possibility of green washing, and the role played by the sensitivity of reputation to advertising efforts is analyzed.
