Journal title ECONOMIA E POLITICA INDUSTRIALE
Author/s Leonardo Becchetti, Nazaria Solferino
Publishing Year 2008 Issue 2008/1 Language Italian
Pages 28 P. 25-52 File size 144 KB
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La differenziazione etica del prodotto - On ethical product differentiation, by Leonardo Becchetti and Nazaria Solferino The model investigates contagion effects in the production of fair trade goods within a mixed oligopoly with horizontal differentiation. In our theoretical framework the Hotelling segment is reinterpreted in terms of ethical distance and two producers (a profit maximising one and a fair trader whose goal is maximising inclusion of marginal producers in the South) compete in price and socially and environmentally responsible characteristics of their products. We find that the profit maximising producer (PMP) finds it optimal to reduce price after the entry of the socially responsible producer or fair trader (FT) when the ethical location of the latter is fixed. We further analyse equilibria of the simultaneous game in which the PMP can choose prices and ethical location and a sequential Stackelberg game. Within this framework we show that when consumers’ costs of ethical distance are high enough equilibria have three main features: minimum price, differentiation ethical imitation and non minimal product differentiation. We explain the differences between these findings and those from traditional horizontal differentiation games as depending from three main features: i) the different goals of the two (profit maximising and zero profit) competitors; ii) the asymmetry and linearity in costs of "ethical" distance and iii) the lack of independence between ethical location and prices. Keywords: product differentiation, social responsibility. JEL Classification: L11, L31.
Leonardo Becchetti, Nazaria Solferino, La differenziazione etica del prodotto in "ECONOMIA E POLITICA INDUSTRIALE " 1/2008, pp 25-52, DOI: