Vertical differentiation in a Cournot industry: The Porter hypothesis and beyond

We modify the vertically differentiated duopoly model by André et al. (2009) replacing Bertrand with Cournot behaviour, and we characterise the region wherein a Porter-type result takes place. We show that the Porter hypothesis applies in an equilibrium taking always the form of a prisoner's dilemma. Moreover, whenever the asymmetry in the cost parameters between green and brown technology is not too high, a class of equilibria emerges wherein firms converge spontaneously onto the green standard as a result of dominant strategies, any environmental regulation being altogether absent.