nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒12‒14
28 papers chosen by
Roger Fouquet
Imperial College, UK

  1. Greenhouse-gas Emission Controls and International Carbon Leakage through Trade Liberalization By Jota Ishikawa; Toshihiro Okubo
  2. The impact of the unilateral EU commitment on the stability of international climate agreements By Thierry, BRECHET; Francois, GERARD; Henry, TULKENS; Jean-Pascal, VAN YPERSELE
  3. The Effect of Uncertainty on Pollution Abatement Investments: Measuring Hurdle Rates for Swedish Industry By Åsa Löfgren; Katrin Millock; Céline Nauges
  4. Investment decisions in liberalized electricity markets : A framework of peak load pricing with strategic firms By Gregor, ZOETTL
  5. Does Weather Explain the Cost and Quality? An Analysis of UK Electricity Distribution Companies By Yu, W.; Jamasb, T.; Pollitt, M.G.
  6. The role of transmission investment in the coordination between generation and transmission in the liberalized power systems By Vincent Rious; Jean-Michel Glachant; Yannick Perez; Philippe Dessante
  7. The Economics Of Growing And Delivering Cellulosic Feedstocks In The Beaumont, Texas Area By Fumasi, Roland J.; Richardson, James W.; Outlaw, Joe L.
  8. Examining the Impact of the World Crude Oil Price on China's Agricultural Commodity Prices: The Case of Corn, Soybean, and Pork By Zhang, Qiang; Reed, Michael
  10. Socioeconomic Impacts of the Langdon Wind Energy Center By Leistritz, F. Larry; Coon, Randal C.
  11. An Economic Analysis of Corn-based Ethanol Production By Koo, Won W.; Taylor, Richard
  12. An Overview of Climate Change: What does it mean for our way of life? What is the best future we can hope for? By Goodwin, Neva
  13. Implications of Oil Price Shocks for Monetary Policy in Ghana: A Vector Error Correction Model By Tweneboah , George; Adam, Anokye M.
  14. Some Economics of Seasonal Gas Storage By Chaton, Corinne; Creti, Anna; Villeneuve, Bertrand
  15. 2008 Outlook of the U.S. and World Sugar Markets, 2007-2017 By Koo, Won W.; Taylor, Richard D.
  16. Biodiesel Mandate Laws in Argentina and Brazil: An Estimation of Soybean Oil Foregone Export Revenues By Nardi, Matias G.; Carpio, Carlos E.; Davis, Todd D.; Ward, William A.
  17. The Contribution of Nonmarket Valuation to Policy: The Case of Nonfederal Hydropower Relicensing By Stephenson, Kurt; Shabman, Leonard
  18. Fuel Choice, Indoor Air Pollution, and Children's Health By John H. Y. Edwards; Christian Langpap
  20. Construction Cost Sensitivity of a Lignocellulosic Ethanol Biorefinery By Busby, David P.; Philips, Andrew L.; Herndon, Cary W., Jr.
  21. Impact of Corn Based Ethanol Production on the U.S. High Fructose Corn Syrup (HFCS) and Sugar Markets By Marzoughi, Hassan; Kennedy, P. Lynn; Hilbun, Brian
  22. Stunted Growth: Natural Resource Concentration, Economic Growth, and Dutch Disease in the Southeastern United States By Elliot, Vaughn; Hartarska, Valentina; Bailey, Conner
  23. Storage and Security of Supply in the Medium Run By Chaton, Corinne; Creti, Anna; Villeneuve, Bertrand
  24. Risk and Return for Bioenergy Crops under Alternative Contracting Arrangements By Larson, James A.; English, Burton C.; He, Lixia
  25. Chicago Board of Trade Ethanol Contract Efficiency By Funk, Samuel; Zook, James; Featherstone, Allen
  26. Assessing Economic and Environmental Impacts of Ethanol Production on Fertilizer Use in Corn Production By Nehring, Richard; Vialou, Alexandre; Erickson, Kenneth; Sandretto, Carmen
  27. Estimating Willingness to Pay for E10 fuel: a contingent valuation study By Bhattacharjee, Sanjoy; Petrolia, Daniel; Herndon, Cary W. "Bill" Jr.
  28. Green consumerism and collective action By CHANDER, Parkash; MUTHUKRISHNAN, Subhashini

  1. By: Jota Ishikawa; Toshihiro Okubo
    Abstract: This paper studies greenhouse-gas (GHG) emission controls in the presence of carbon leakage through international firm relocation. The Kyoto Protocol requires developed countries to reduce GHG emissions by a certain amount. Comparing emission quotas with emission taxes, we show that taxes coupled with lower trade costs facilitate more firm relocations than quotas do, causing more international carbon leakage. Thus, if a country is concerned about global emissions, emission quotas would be adopted to mitigate the carbon leakage. Firm relocation entails a trade-off between trade liberalization and emission regulations. Emission regulations may be hampered by trade liberalization, and vice versa.
    Keywords: trade liberalization, global warming, Kyoto Protocol, emission tax, emission quota, carbon leakage
    JEL: F18 Q54
    Date: 2008–11
  2. By: Thierry, BRECHET (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)); Francois, GERARD (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)); Henry, TULKENS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)); Jean-Pascal, VAN YPERSELE
    Abstract: In this paper we analyze the negotiation strategy of the European Union regarding the formation of an international climate agreement for the post-2012 era. We use game theoretical stability concepts to explore incentives for key players in the climate policy game to join future climate agreements. We compare a minus 20 percent unilateral commitment strategy by the EU with a unilateral minus 30 percent emission reduction strategy for all Annex-B countries. Using a numerical integrated assessment climate-economy simulation model, we find that carbon leakage effects are negligible. Ther EU strategy to reduce emissions by 30% (compared to 1990 levels) by 2020 if other Annex-B countries follow does not induce participation of the USA with a similar 30% reduction commitement. However, the model shows that an appropriate initial allocation of emission allowances may stabilize a larger and more ambitious climate coalition than the Kyoto Protocol in its first commitment period.
    Keywords: Climate change, Coalition theory, Integrated assessment model, Kyoto protocol
    JEL: C6 C7 H4 Q5
    Date: 2008–12–04
  3. By: Åsa Löfgren (Department of Economics, Göteborg University - University of Göteborg); Katrin Millock (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Céline Nauges (LERNA - INRA - INRA - Université des Sciences Sociales - Toulouse I)
    Abstract: We estimate hurdle rates for firms' investments in pollution abatement technology, using ex post data. The method is based on a structural option value model where the future price of polluting fuel is the major source of uncertainty facing the firm. The empirical procedure is illustrated using a panel of firms from the Swedish pulp and paper industry, and the energy and heating sector, and their sulfur dioxide emissions over the period 2000-2003. The results indicate that hurdle rates of investment vary from 2.7 to 3.1 in the pulp and paper industry, and from 3.4 to 3.6 in the energy and heating sector depending on econometric specification.
    Keywords: option value; oil price uncertainty; abatement investment; sulfur emissions; pulp and paper industry; energy and heating sector
    Date: 2008–12
  4. By: Gregor, ZOETTL
    Abstract: In this article we analyze firms investment incentives in liberalized electricity markets. Since electricity is economically non storable, it is optional for firms to invest in a differentiated portfolio of technologies in order to serve strongly fluctuating demand. Prior to the Liberalization of electricity markets, for regulated monopolists, optimal investment and pricing strategies have been analyzed in the peak load pricing literature (compare Crew and Kleindorder (1986)). In restructured electricity markets regulated monopolistic generators have often been replaced by competing and potentially strategic firms. This article aims to respond to the changed reality and model investment decisions of strategic firms in those markets. We derive equilibrium investment for strategic firms and compare to the benchmark cases of perfect competition and monopoly outcomes. We find that strategic firms have an incentive to overinvest in base-load technologies but choose total capacities too low from a welfare point of view. By fitting the framework to a specific electricity market (Germany) we are able to empirically analyze Investic choices of strategic firms, and quantifiy the potential for market power and its impact on generation portfolios in restructured electricity markets in the long run.
    Date: 2008–08–27
  5. By: Yu, W.; Jamasb, T.; Pollitt, M.G.
    Abstract: In recent years, a number of empirical studies and energy regulators have applied benchmarking techniques to measure the efficiency and performance of network utilities. An important issue has been the extent to which such results are influenced by contextual factors. Among these, weather factors are frequently discussed as being important. We use Factor Analysis and two-stage Data Envelopment Analysis techniques to examine the effect of a set of important weather factors (gale, hail, temperatures, rainfall and thunder) on the performance of electricity distribution networks in the UK. The results indicate that such factors often do not have a significant economic and statistical effect on the overall performance of the utilities. The weather parameters in some models are significant in terms of economic efficiency. After excluding network length from the outputs, the weather effect becomes less significant in the model. Hence, the network length is counteracting the weather effect. The results echo our previous findings of the importance of extending the basic model to include other inputs such as Totex, CML and network energy losses in regulatory benchmarking.
    Keywords: Data Envelopment Analysis, electricity, weather, quality of service.
    JEL: L15 L51 L94
    Date: 2008–12
  6. By: Vincent Rious (SUPELEC-Campus Gif - SUPELEC); Jean-Michel Glachant (LdP - Loyola de Palacio Programme - European University Institute); Yannick Perez (LdP - Loyola de Palacio Programme - European University Institute, ADIS - Analyse des Dynamiques Industrielles et Sociales - Université Paris Sud - Paris XI); Philippe Dessante (SUPELEC-Campus Gif - SUPELEC)
    Abstract: This paper examines how transmission coordinates with generation to the long term in a liberalized power system. We rely on a modular analysis to separate the mechanisms of coordination between generation and transmission of electricity into distinct modules. The governance structure of transmission completes this analysis framework. We then show that in a logic of complementarity, this governance structure influences the options that TSO implements to manage effectively power flows. Although locational signals are necessary to guide the installation of new power plants, the governance structure explains that investment in network may be the only effective method of longterm coordination between generation and transmission.
    Keywords: The diversity of design of TSOs
    Date: 2008–10–10
  7. By: Fumasi, Roland J.; Richardson, James W.; Outlaw, Joe L.
    Abstract: We estimate the contract prices that must be paid to grow cellulosic energy crops, and the costs of harvesting and transporting those crops in the Beaumont, TX area. Results indicate that the delivered price would range between $54 and $101 per ton of dry matter depending on the specific crop.
    Keywords: renewable fuels, biofuels, alternative fuels, cellulosic, biomass, feedstock, Monte Carlo simulation, Resource /Energy Economics and Policy, Q12, Q42,
    Date: 2008
  8. By: Zhang, Qiang; Reed, Michael
    Abstract: This study investigates effects of the world crude oil price on feed grain prices and pork prices in China. The results from time series techniques show the influences of crude oil price are not significant over the study period. The pork demand and supply result in the skyrocketing pork price.
    Keywords: Agribusiness, Demand and Price Analysis,
    Date: 2008
  9. By: Brechbill, Sarah C.; Tyner, Wallace E.
    Abstract: With cellulosic energy production from various forms of biomass becoming popular in renewable energy research, agricultural producers may be called upon to plant and harvest switchgrass or collect corn stover to supply such energy production to nearby facilities. Determining the entire production and transportation cost to the producer of switchgrass or corn stover and the amount available within a given distance of the plant will result in a per ton cost the plant will need to pay producers in order to be supplied with sufficient quantities of biomass.
    Keywords: Crop Production/Industries, Production Economics, Resource /Energy Economics and Policy,
    Date: 2008
  10. By: Leistritz, F. Larry; Coon, Randal C.
    Abstract: The Langdon Wind Energy Center is the largest wind energy facility to be developed in North Dakota to date and consists of 106 turbines with a generating capacity of 1.5 MW each, mounted on towers 262 feet tall. The project is owned by FPL Energy and Ottertail Power Company; FPL Energy was the project developer. Construction of the facility began in July, 2007 and was completed in January, 2008. The peak construction work force was 269 workers. A force of 10 permanent employees will operate and maintain the energy center. Construction of the Langdon Wind Energy Center is estimated to have resulted in payments of more than $56 million to entities within North Dakota. During operation, the facility will make payments of about $1.4 million annually to North Dakota entities, including $413,000 in payments to landowners with easement agreements. The $56 million in statewide direct expenditures during the construction period were estimated to result in an additional $169 million in secondary impacts for a total, one-time construction impact of $225 million. The $1.4 million in annual direct impacts associated with project operation lead to an additional $3 million in secondary impacts for a total annual impact of $4.4 million. During operation, the county is expected to receive $191,000 annually in direct property tax payments and $194,000 in total increased property tax revenues while having negligible increases in costs. The same pattern is repeated for the Langdon school district, where an estimated $265,000 in property tax revenues will be received annually from the project during the operations period. This case study shows that commercial scale wind farms can benefit nearby communities by creating stable, well-paid jobs, through lease payments to land owners, and by adding to the local tax base.
    Keywords: wind energy, renewable energy, economic impact, fiscal impact,
    Date: 2008–05
  11. By: Koo, Won W.; Taylor, Richard
    Abstract: A global multi-commodity simulation model was developed to estimate the impact of changes in ethanol production on the U.S. corn industry. Increased ethanol production under the Energy Acts of 2005 and 2007 resulted in a significant increase in the price of corn. However, for corn-based ethanol production, the break-even price of corn is approximately $4.52 per bushel with a federal subsidy of $0.51 per gallon of pure ethanol and $2.50 gasoline. With a corn price of $4.52, the economically desirable ethanol production is approximately 11 billion gallons. In order to produce 15 billion gallons of corn-based ethanol and to maintain the price of corn at $4.52 per bushel, supply of corn in the U.S. should be increased substantially through increases in corn yield rather than increases in corn acres. The increased price of corn leads to major structural changes in the corn industry in the United States as well as other corn producing and consuming countries. Corn production would increase in response to higher price levels, corn used for livestock feed may decrease, and U.S. exports decrease due mainly to a surge in corn used for ethanol production. This decrease in U.S. exports should be met by additional production in other countries. The increased price of corn also leads to increases in the prices of soybeans, wheat, high fructose corn syrup (HFCS), and agricultural inputs, such as land value and cash rent, fertilizer and chemicals, and farm equipment. In addition, the current price of corn has resulted in an increase in the production cost of livestock. The increase in prices of agricultural commodities and inputs would cause increases in retail prices of food in the U.S.
    Keywords: ethanol, price impacts, supply, demand, econometric simulation, HFCS, Resource /Energy Economics and Policy,
    Date: 2008
  12. By: Goodwin, Neva
    Abstract: This paper starts with the question of whether climate change will require a significant reduction of consumption among the richer people in the world, and ends with the most optimistic picture the author can conjure up, of the world in the year 2075. That hopeful picture is of a world in which inequalities €Ӡamong and within nations €Ӡhave been substantially reduced. The challenges and adjustments confronting humanity in the coming decades provide an opportunity that could be used to mitigate climate change in ways that can improve the circumstances of the poor. Ecological reasons to reduce throughput of energy and materials in economic systems urge the abandonment of high-consumption life-styles. The 21st century will be an era of many losses, but it is conceivable that societies will successfully make the transition from goals of economic growth, as understood in the 20th century, to goals of maintaining and increasing sustainable well-being.
    Keywords: Environmental Economics and Policy, Institutional and Behavioral Economics, International Development, International Relations/Trade, Political Economy, Resource /Energy Economics and Policy,
    Date: 2008–03
  13. By: Tweneboah , George; Adam, Anokye M.
    Abstract: We estimate a Vector Error Correction Model to explore the long run and short run linkages between the world crude oil price and economic activity in Ghana for the period 1970:1 to 2006:4. The results point out that there is a long run relationship between the variables under consideration. We find that an unexpected oil price increase is followed by an increase in price level and a decline in output in Ghana. We argue that monetary policy has in the past been with the intention of lessening negative growth consequences of oil price shocks, at the cost of higher inflation.
    Keywords: Oil price shock; cointegration; vector error correction; impulse response
    JEL: E31 E52 Q43
    Date: 2008
  14. By: Chaton, Corinne; Creti, Anna; Villeneuve, Bertrand
    Abstract: We propose a model of seasonal gas markets which is flexible enough to include supply and demand shocks while also considering exhaustibility. The relative performances of alternative policies based on price caps and associated measures or tariffs are discussed. We illustrate with structural estimates on US data how this theory can be used to give insights into the intertemporal incidence of policy instruments.
    Keywords: Gas storage; energy policy; US
    JEL: L95 L71 F1 Q43
    Date: 2008–07–21
  15. By: Koo, Won W.; Taylor, Richard D.
    Abstract: This report evaluates the U.S. and world sugar markets for 2007-2017 using the Global Sugar Policy Simulation Model. This analysis is based on assumptions about general economic conditions, agricultural policies, population growth, weather conditions, and technological changes. Both the U.S. and world sugar economies are predicted to remain profitable over the next ten years mainly because of the recent surge in world oil prices have increased the conversion of sugar into ethanol in Brazil, while other exporting countries have increased their production in response to those higher prices. Brazil is the largest exporter of sugar, and it is expected that the rate of increase in Brazilian sugar exports may be reduced due to high oil prices. World demand for sugar is expected to grow at a similar rate to world supply, resulting in Carribean sugar prices remaining near the 13.0 -15.5 cents/lb range throughout the forecast period. The U.S. wholesale price of sugar is projected to increase slightly from 26.25 cents/lb in 2007 to 29.9 cents/lb in 2017, if Brazil continues to convert sugar into ethanol. It is projected that Mexico will be able to export 621 thousand metric tons of sugar to the United States by 2017. World trade volumes of sugar are expected to increase throughout the forecast period.
    Keywords: sugar, production, exports, consumption, ending stocks,
    Date: 2008–05
  16. By: Nardi, Matias G.; Carpio, Carlos E.; Davis, Todd D.; Ward, William A.
    Abstract: Replaced with revised version of paper 02/22/08.
    Keywords: Research and Development/Tech Change/Emerging Technologies,
    Date: 2008
  17. By: Stephenson, Kurt; Shabman, Leonard
    Abstract: The contribution of nonmarket valuation studies to decisions about the operation of nonfederal hydroelectric facilities is examined. Hydropower licensing reforms by the Federal Energy Regulatory Commission to better weigh market and nonmarket tradeoffs did not require or use nonmarket valuation. License negotiation processes are interpreted as a substitute for valuation.
    Keywords: Resource /Energy Economics and Policy,
    Date: 2008
  18. By: John H. Y. Edwards (Department of Economics, Tulane University); Christian Langpap (Department of Agricultural and Resource Economics, Oregon State University)
    Abstract: Much of the world population, particularly in developing countries, still relies on firewood to meet basic energy needs. The resulting indoor air pollution can have severe health consequences, particularly for young children who spend considerable time in close proximity to the fire while their mothers cook. In this paper we use data from a household survey to examine gas stove adoption, firewood consumption, and the resulting effects on the health of young children in Guatemala. Our findings suggest that cooking with firewood has significant negative impacts on children's respiratory health. We also find strong evidence that these impacts go well beyond respiratory problems and have much broader health effects. Simulation results indicate that policies which attempt to reduce the consumption of wood and/or accelerate the adoption of LPG may not be as effective at improving respiratory health as policies that target cooking habits to directly attempt to reduce exposure by young children. However, broader health effects are more effectively addressed by policies aimed directly at eliminating the use of wood fuel.
    Keywords: indoor air pollution, health, children, fuel transition, firewood, Guatemala
    JEL: Q53 Q56 D13 I12 O13
    Date: 2008–12
  19. By: Coon, Randal C.; Leistritz, F. Larry
    Abstract: A survey of firms involved in lignite mining and/or conversion resulted in estimates of their expenditures to in-state entities. An input-output model was applied to estimate secondary and total impacts of the direct expenditures. Direct expenditures totaled $806.8 million for 2007 and were estimated at $995.4 million for 2008. The total (direct plus secondary) contribution to the North Dakota economy was estimated to be $2.4 billion for 2007 and $2.8 billion for 2008. State tax revenues resulting from industry activities totaled $89 million in 2007, and industry direct employment totaled 3,882. In addition, economic activity resulting from the industry was estimated to support more than 21,000 jobs in other sectors of the state economy.
    Keywords: lignite, coal, economic impact, Community/Rural/Urban Development, Resource /Energy Economics and Policy,
    Date: 2008
  20. By: Busby, David P.; Philips, Andrew L.; Herndon, Cary W., Jr.
    Abstract: The technology has been developed to convert feedstock with cellulose content into ethanol. However, ethanol produced from cellulosic feedstock is the same as ethanol distilled from grain. The objective of research is to determine the price per gallon of ethanol needed so that producing lignocellulosic based ethanol become economically feasible.
    Keywords: Environmental Economics and Policy, Production Economics,
    Date: 2008
  21. By: Marzoughi, Hassan; Kennedy, P. Lynn; Hilbun, Brian
    Abstract: The objective of this paper is to determine the impact of ethanol production on the sweetener market in the U.S. It was found that ethanol production has increased corn demand and prices, and therefore, may have a negative impact on HFCS production and increase the demand for sugar.
    Keywords: Agribusiness, Production Economics,
    Date: 2008
  22. By: Elliot, Vaughn; Hartarska, Valentina; Bailey, Conner
    Abstract: We study the link between economic growth and resource endowment in the southeastern United States and find signs of Dutch Disease. Using data for 815 counties in this region, we focus attention on the connection between economic growth and forest resources. Our data support the Dutch Disease theory that economic reliance on natural resources contributes to low economic growth.
    Keywords: Community/Rural/Urban Development, Resource /Energy Economics and Policy,
    Date: 2008
  23. By: Chaton, Corinne; Creti, Anna; Villeneuve, Bertrand
    Abstract: This paper analyzes the role of private storage in a market for a commodity (e.g. natural gas) whose supply is subject to the threat of an irreversible disruption. We focus on the medium term in which seasonality of demand and exhaustibility can be neglected. We characterize the price and inventory dynamics (accumulation, drainage and limit stocks) in a competitive equilibrium with rational expectations. We show the robustness of our results to alternative scenarios in which either a disruption has finite duration or the crisis is foreseen. During the crisis consumers may put pressure on the Government to intervene, but too severe antispeculative measures would inefficiently discourage storage. Practical solutions to this dilemma cause welfare losses that we characterize and quantify.
    Keywords: Storage; Dynamic models; Gas industry
    JEL: L95 Q48 L98
    Date: 2008–07–23
  24. By: Larson, James A.; English, Burton C.; He, Lixia
    Abstract: This study evaluated the potential to supply biomass feedstocks under alternative contract arrangements for a northwest Tennessee 2,400 acre grain farm. The four potential types of contracts analyzed in this study offer different levels of biomass price, yield, and production cost risk sharing between the representative farm and the processor.
    Keywords: Farm Management, Resource /Energy Economics and Policy,
    Date: 2008
  25. By: Funk, Samuel; Zook, James; Featherstone, Allen
    Abstract: Firms producing ethanol may find management of the price risk associated with production of this leading alternative fuel a key factor to continued success. As with other agricultural commodities, the influence and ability of futures contracts to serve as a risk management tool deserves attention.
    Keywords: contract efficiency, ethanol, futures contracts, Crop Production/Industries, Risk and Uncertainty, Q13, Q43, M31,
    Date: 2008
  26. By: Nehring, Richard; Vialou, Alexandre; Erickson, Kenneth; Sandretto, Carmen
    Abstract: The share of corn used in ethanol production has been grownig rapidly. USDA predicts that more than 30 percent of the corn crop will be used for ethanol production in 2009/2010. Expanded corn acreage contributes to the application of more fertilizer and is likely to introduce a larger volume of nutrients into the environment. This study found that an increase in ethanol production is consistent with a significant increase in quality-adjusted fertilizer use in selected corn states.
    Keywords: quality-adjusted fertilizer, corn production, ethanol, excess nutrients, Crop Production/Industries, Environmental Economics and Policy,
    Date: 2008
  27. By: Bhattacharjee, Sanjoy; Petrolia, Daniel; Herndon, Cary W. "Bill" Jr.
    Abstract: In this study, we measure willingness to pay for E10 fuel by US consumers employing a contingent valuation technique in a simultaneous latent variable equation framework. The simultaneous equation framework helps us to understand the way consumers' perceptions about ethanol are developed and influence their respective buying behavior.
    Keywords: E10 ethanol, perceptions and economic choice, latent variable, random utility models, Institutional and Behavioral Economics, Research and Development/Tech Change/Emerging Technologies, Research Methods/ Statistical Methods, C12, C35, D12,
    Date: 2008
  28. By: CHANDER, Parkash; MUTHUKRISHNAN, Subhashini
    Abstract: We analyze the effect of collective action by green/environmentally aware consumers on ambient environmental quality and market equilibrium. We consider a model with two types of consumers who differ in their willingness-to-pay for a good available in two different environmental qualities, and two competing firms: one selling the good of high environmental quality and the other of low environmental quality. We show that collective action by green consumers reduces competition and leads to higher prices for the good of both qualities. Though it improves the ambient environmental quality, it may reduce the welfare of both types of consumers.
    Keywords: green consumers, collective action, environmental quality, differentiated duopoly, firm profitability
    JEL: H23 Q20 L13
    Date: 2007–08

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