On the effect of social norms to reduce pollution

Abstract

We analyse how market competition in a vertically dierentiated pol- luting industry is aected by product variants that comply at dierent levels with social norms. A green consumption behaviour is con- sidered as a byword of good citizenship. Consumer preferences depend on a combination of hedonic quality and compliance with the norms. As- suming that the high hedonic quality variant complies less with the norms than the low hedonic quality one, we characterize the dierent equilibrium con…gurations, depending on the perceived intensity of such norms. Then, we focus on the role that institutions may have in using these norms to