In this paper we analyse a setup where consumers are heterogeneous in the perception of environmental quality. The equilibrium is verified in a setting with horizontal and vertical (green) differentiation. Profits are increasing in the misperception of quality, while, the investment in green...

We seek to understand how and when government should (and should not) intervene to stimulate green product development when competing firms with asymmetric credibilities communicate their environmental performance through ecolabels. To that end, we develop a consumer-driven model of green...