[Seminaire CREM] Raising environmental awareness to avoid the worst?

Abstract:
We aim at investigating whether and to what extent raising environmental awareness may avoid the worst assumed to occur if the environmental quality falls below some threshold. We consider a monopoly offering a product characterized by two vertical attributes: an environmental attribute and a hedonic attribute and a population of consumers heterogeneous with respect to the relative importance/weight they assign to each attribute. We first determine the optimal monopoly choice in terms of price and product's attributes. If the attributes' costs are high enough, the monopoly does not survive. Otherwise, depending on the attributes' costs and consumers' distribution, we find that the monopoly may offer the highest quality for both attributes or the highest quality on one attribute and the lowest one for the other attribute.
When the worst occurs, i.e. the monopoly offers the lowest environmental attribute, we study two kinds of interventions that may push the monopoly to improve its environmental quality: (1) Taxation/subsidy mix on the hedonic/environmental marginal costs (2) Raising consumers' environmental awareness. We prove that while the first type of policy is always effective, raising consumers' environmental awareness may have a null effect on the monopoly offer, thus may be insufficient to avoid the worst.