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Environmental Policy with Green Consumerism

Working Paper
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To shed light on the question of whether green consumerism is beneficial to the environment and the economy, Stefan Ambec and Philippe De Donder study the political economy of environmental regulations in a model with neutral and green consumers where the latter derive some warm glow from buying a good of higher environmental quality produced by a profit-maximizing monopoly, while the good bought by neutral consumers is provided by a competitive fringe.