Presence of Green Consumers: Bat is Bad

Indian Statistical Inst. Discussion Paper No. 01-10

34 Pages Posted: 15 Apr 2002

See all articles by Sangeeta Bansal

Sangeeta Bansal

Indian Statistical Institute, New Delhi - Delhi Centre

Shubhashis Gangopadhyay

India Development Foundation; University of Gothenburg; University of Groningen, Faculty of Economics and Business, Students; Indian School of Public Policy

Date Written: August 2001

Abstract

This paper examines the validity of the Porter hypothesis in the presence of environmentally conscious consumers and asymmetry of information between the regulator and the polluting agent. There are two implications of the Porter hypothesis. One, a policy based on "best available technology" hampers firms' incentives to invest in R&D effort for developing new and (environmentally) improved technology. Second, a stricter environmental regulation spurs innovation and thus improves welfare. We argue that the first implication is, indeed, true. As for the second, a stricter regulation is better, but the strictest possible regulation is not optimal.

Keywords: Environmentally conscious consumers, best available technology, environmental regulation, Porter's hypothesis, technological development, welfare, compliance

JEL Classification: L51, O38, Q28

Suggested Citation

Bansal, Sangeeta and Gangopadhyay, Shubhashis, Presence of Green Consumers: Bat is Bad (August 2001). Indian Statistical Inst. Discussion Paper No. 01-10, Available at SSRN: https://ssrn.com/abstract=307301 or http://dx.doi.org/10.2139/ssrn.307301

Sangeeta Bansal (Contact Author)

Indian Statistical Institute, New Delhi - Delhi Centre ( email )

7 S .J. S.
Sansanwal Marg
New Delhi, 110016
India
651 4594 (Phone)
685 6779 (Fax)

Shubhashis Gangopadhyay

India Development Foundation ( email )

4101 DLF Phase IV
Gurugram, Haryana 122002
India
+91 9910991221 (Phone)

University of Gothenburg

Gothenburg
Sweden

University of Groningen, Faculty of Economics and Business, Students

Postbus 72
9700 AB Groningen
Netherlands

Indian School of Public Policy

Delhi
India

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