Environment-Conscious Consumer: Goodwill and Profit Growth

Abstract

We investigate conscious consumerism’s effect on a green packaging business strategy. Improving consumers’ environmental awareness increases eco-friendly packaging, thereby yielding greater profits despite the additional production costs. We use a duopoly model between firms using eco-friendly and non-eco-friendly packaging. Further, we analyze the model using Bertrand competition to investigate whether conscious consumer behavior affects market equilibrium and firms’ financial profits. We find that firms using (non-) eco-friendly packaging can have an equilibrium price once the market base of firms with non-eco-friendly packaged products is greater than the threshold level—irrespective of the environmental value attributed by the consumer. Moreover, we find that if a sufficient market base is secured, environmental management increases profit for firms using (non-)eco-friendly packaging. This study addresses how consumers’ environmental awareness is associated with pricing in market competition, thus enriching the existing literature on environmental problems and management strategies. Consumer behavior also contributes to practice by allowing firms to adequately deal with consumers’ green behavior, given the uptrend in consumers’ environmental awareness.