Environmental certification in a differentiated duopoly

Abstract

The articleaims to explore the role of horizontal product differentiation in promoting/hindering firm’s participation in environmental certification. To this purpose, we consider a differentiated duopoly model where firms compete in both prices and environmental qualities. The result shows that when the level of horizontal differentiation relative to the degree of vertical differentiation is sufficiently high, only the symmetric equilibrium where both firms choose to or both choose not to certify their products exists. Asymmetric equilibrium (vertical dominance equilibrium) occurs when the level of horizontal differentiation relative to the degree of vertical differentiation is sufficiently low.

Keywords:

• environmental certification
• horizontal and vertical differentiation
• two-dimensional competition

JEL CLASSIFICATIONS:

• L15
• D82
• L13

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China (71972071, 71972070), and the Fundamental Research Funds for the Central Universities.