In a vertically differentiated setting, we consider a two-stage game between a clean firm and a dirty producer with quality competition at the first stage and price competition at the second stage under the assumption that consumers have relative preferences for quality. The equilibrium configuration changes depending on the consumers' dispersion and the relative preferences: either both producers are active at equilibrium, or the green producer is the only firm active in the market, the brown competitor being out. We analyze how the equilibrium changes when preferences are country specific (developed vs. developing countries). Finally, we show that whatever the market configuration at equilibrium, there can be a pollution damage reduction compared to the standard case without relative preferences. To the best of our knowledge, we are the first to introduce in the literature of green consumerism the notion of (possibly country-specific) relative preferences.

Human actions are often guided both by individual rationality and by social norms. In this paper we explore how market competition values the variants of a product, when these variants embody at different levels the requirements derived from some social norm. In a model where preferences of consumers depend partially on the levels of compliance of the variants with the social norm, we characterize the equilibrium path along which firms choose sequentially their level of compliance and their price.

We consider a vertically differentiated market in which consumers’ utility is assumed to depend on the price, congestion level and the stand‐alone quality of the good or service. Two firms compete on this market, choosing capacities, stand‐alone qualities and prices. We characterize completely the subgame perfect equilibrium for the homogenous market case (where only one firm is active without congestion). We prove that both firms are active, choosing minimal differentiation along the capacity and quality dimensions. Therefore, the presence of congestion rules out market preemption as a possible outcome in equilibrium and weakens the incentive to differentiate.

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