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.