DGA Seminar: Can Baris Cetin

Can Baris Cetin
HEC Montréal, Canada

Dynamic Games and Applications Seminar

Strategic Pricing and Investment in Environmental Quality by an Incumbent Facing a Greenwasher Entrant

Apr 20, 2023   11:00 AM — 12:00 PM (Montreal time)

Webinar link.

In this study, we analyze the effect of greenwashing on firms’ strategies and outcomes and consumers. We consider a two-stage game where a monopolist makes pricing and environmental quality investment in the first stage and competes with an entrant in the second stage. The incumbent is a green firm and does not overrate the environmental quality of its product, while the entrant may be tempted by greenwashing. We assume that only inexperienced consumers, that is, consumers who did not purchase the product in the first period, can be lured by greenwashing. Consequently, our model captures two important dynamic features, namely, the change in the competitive structure, and the presence of a “learning” effect in the market. We investigate the conditions that make greenwashing profitable for the entrant, how the incumbent responds to greenwashing, and the impact of greenwashing on the environment and customers.

(with Arka Mukherjee and Georges Zaccour)