Social awareness and price competition

Abstract

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.

Hedonic vs Environmental Quality: Which Policy Can Help in Lowering Pollution Emissions?

“…Among 3 Since the seminal work of Leibenstein (1950), economists have aknowledged the importance of social factors in consumption decisions. Akerlof (1997) has showed that consumer satisfaction increases in proportion to the di¤erence between social classes.…”

“…This is captured by resorting to the theory of relative preferences, recently developed by Ghazzai (2008) and Alexopoulos and Sapp (2006), inter alii. 3 Our main results are as follows. When consumer preferences favour hedonic quality, taxation prevails as the best policy instrument to achieve the highest level of social welfare.…”

On the Effect of Social Norms to Reduce Pollution

“…This may have misleading implications at the equilibrium analysis. 5 Indeed, the existence of a con ‡ict between the value attributed to the hedonic quality and the positional satisfaction deriving from consuming an environmentally friendly good may change the equilibrium market con…guration compared to the traditional setting of vertically di¤erenti-ated goods. In particular, we prove that there exist circumstances in which the producer of the low-but-green variant quotes a higher price than the rival due to the perceived (and highly appreciated) superior environmental performance.…”

Hedonic Quality, Social Norms, and Environmental Campaigns

“…It also includes a detailed consumption guide that draws attention to the environmental impact of various products and daily habits. 6 "Cambia la lampadina" (Change the Light Bulb) was launched in Italy in 2010 and developed by the Ministry of the Environment, comparing consumption of incandescent light bulbs versus low-energy consumption light bulbs. 7 In the US, the National Environmental Policy Act (NEPA) requires an environmental impact statement (EIS) that describes the positive and negative environmental effects of each proposed action.…”