The Effect of Green Technology Adoption Strategy on Duopoly Competition

Abstract

Given consumers’ trade-offs between conventional economic and environmental attributes of products, we provide a game-theoretic model to explore the role of GTA strategy in duopoly competition by incorporating two salient features: Two product types — The green product produced by a firm with GTA strategy and the ordinary product produced by a firm without GTA strategy, and two consumer segments, i.e., the green consumers who are willing to pay for green products and the ordinary consumers who are willing to pay for ordinary products. Our analysis shows that GTA strategy may either increase or decrease the green firm’s quality provision. The subtle relationship between the green firm’s quality strategy and GTA strategy not only affects its own equilibrium performances but its rival’s. We also find that two consumer segments may be better off in the presence of a lower GTA intensity. Additionally, although the GTA strategy benefits the environment, the GTA investment is not the more the better. Finally, we find that GTA strategy would lead to higher social welfare only when the GTA efficiency is high enough. Our work not only provides an alternative economic explanation why some firms choose to implement GTA strategy and some do not in reality, but gives managerial insights for firms with different GTA strategies as well as policy insights for the social planner.