Innovative green product diffusion through word of mouth

Abstract

Green products are gaining popularity because of their environmental friendliness compared with conventional products. This study examines a word-of-mouth (WOM) diffusion problem of a newly launched green product and investigates the effects of consumers’ environmental awareness (CEA). Analytical results show that CEA significantly affects green product diffusion in terms of firms’ pricing strategies and market shares. The market structure also has effects on diffusing a green product: the pricing strategies and environmental performance of diffusing a green product in a Bertrand competition market are different from those in a Stackelberg game market. When considering green-design decision, it is interesting to show that the green product’s price decreases with the increase of CEA, which is contrary to the pricing strategy without green design. From the numerical study of the CEA-featured WOM diffusion case, we find that CEA-featured WOM does not affect the pricing strategies of the green and conventional products, but does have a significant impact on the market shares of both products.