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Economics Working Papers

2006

Energy/fuel efficiency

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Collective Voluntary Agreements And The Production Of Less Polluting Products, Rasha Ahmed, Segerson Kathleen Jul 2006

Collective Voluntary Agreements And The Production Of Less Polluting Products, Rasha Ahmed, Segerson Kathleen

Economics Working Papers

Recently, some industries have collectively agreed not to produce models that do not meet an energy efficiency (and hence an environmental) standard. This paper presents a simple model that can be used to examine a voluntary collective agreement to limit or completely eliminate the low efficiency model of a given product (e.g., a low efficiency washing machine). We show that, when there is competition between firms, a collective agreement to limit or even eliminate production of the polluting model can actually increase profits for all firms in the industry. This suggests that a collective agreement of this type might actually …