In our model of ethical product differentiation two duopolists, a profit maximizing producer (PMP) and a “socially responsible” (SR) producer, compete over prices and “socially and environmentally responsible” features of their products. We show that the PMP finds it optimal to reduce his price after the SR producer's entry when his location is fixed. We also outline equilibria in a sequential game in which the SR producer is a Stackelberg leader. We show that, when consumers’ perceived costs of ethical distance are high enough, equilibria have three main features: minimum price differentiation, ethical imitation and non minimal ethical differentiation.
On Ethical Product Differentiation with Asymmetric Distance Costs
GIALLONARDO, LUISA;
2007-01-01
Abstract
In our model of ethical product differentiation two duopolists, a profit maximizing producer (PMP) and a “socially responsible” (SR) producer, compete over prices and “socially and environmentally responsible” features of their products. We show that the PMP finds it optimal to reduce his price after the SR producer's entry when his location is fixed. We also outline equilibria in a sequential game in which the SR producer is a Stackelberg leader. We show that, when consumers’ perceived costs of ethical distance are high enough, equilibria have three main features: minimum price differentiation, ethical imitation and non minimal ethical differentiation.Pubblicazioni consigliate
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