Green Innovation and Market Power

This review summarizes the extant debate on the interplay between oligopolistic behavior and policy stimuli in determining firms' green R&D efforts. It encompasses models based on the representative consumer and discrete choice approaches, under both Cournot and Bertrand competition. It also draws on the growing literature on environmental quality, green consumerism's ability to act as a net substitute for environmental policy and the Porter hypothesis. The review discusses empirical evidence on the main results of theoretical models. Several plausible directions for future research are also proposed.