Awareness Campaigns in a Horizontally Differentiated Market with Environmentally Conscious Consumers, Private Versus Public Duopoly

Abstract

This paper examines horizontally differentiated duopolies à la Hotelling with environmentally conscious consumers and a planner promoting a sustainable good with costly awareness campaigns (ACs). The objective is to find the planner’s optimal strategies and their effects on the firms’ behaviour. The analysis is carried out with two approaches, considering a private and a public duopoly. In both, it is shown that the planner chooses the average characteristic supported by a higher intensity campaign. However, with the private one, such an outcome is possible if the planner has minimal resources. Consumer consciousness and ACs have opposite effects on the firms and the planner. It is proven that consumer awareness favours the interests of the duopolies and reduces those of the planner, while the contrary is true for ACs. Finally, it is shown that a public duopoly is the best scenario for sustainability. This study provides an environmental policy to replace or complement traditional instruments and a more suitable business framework to achieve efficient results.