Conference Agenda
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Daily Overview |
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Green Preferences Location: D-105 Session Chair: Laís Ramos Gomes, Universidad de Valladolid | |
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Environmental regulation and green reputation: tax evasion versus greenwashing 1: Universidad de Valladolid, Spain; 2: Universidad de Valladolid, Spain; 3: Universidad de Valladolid, Spain The paper analyzes a Stackelberg differential game between a leading social-welfare-maximizer regulator and a follower profit-maximizer pol- luting firm. Regulation is implemented by a tax on emissions plus a fine for misreporting. The firm chooses the emissions and the reported amount, and therefore the evasion, to maximize profits net of taxes and fines. The firm has a green reputation, which evolves according to the reaction of environmentally concerned consumers to the firm’s behavior. Informed consumers penalize misreporting, while uninformed consumers reward low reported emissions, since they falsely signal firm’s greenness, an effect interpreted as the firm’s greenwashing. Interestingly, credibility on and response strength to this signal by uninformed consumers raises greenwashing, which improves the firm’s green reputation, the consumers’ willingness to pay, and social welfare. This comes together with a higher tax and a better environment. Similarly, a higher share of informed con- sumers, by inducing a tax reduction, reduces fraud, thereby improving the firm’s green reputation and, in turn, social welfare, although at the expense of a worse environment. | |