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Charla Profesor Ram Bala – Seminario Management Science


13:30 horas, sala 316, Beauchef 851 (tercer piso)

Title: “The Green Product Agenda: Competition, Cost Structure and Accentuation”

Authors:  Arda Yenipazarli, Asoo Vakharia, Ram Bala


Many companies introduce new products with both visible and latent green attributes that consumers value and are willing to purchase at a premium. Often, the latent attributes arise from green initiatives in the company’s manufacturing processes and supply chain. Consequently, these latent attributes lack market visibility and require communication by firms to their consumers through the use of the appropriate levels of advertising. This strategy is referred to as accentuation. Depending on product category, accentuation could be either combative which exerts a market-share effect, acting to redistribute customers in the market between firms, or constructive which exerts a market-size effect, expanding the overall size of the market. The use of accentuation affects the return-on-investment (ROI) on visible green product attributes, particularly in a competitive environment. In addition to firm profitability, this also affects the objectives of a regulator who is concerned about greater access to greener products. We study the efficacy of accentuation from the perspective of competing firms as well as that of a regulator in a context where the cost structure of green quality provision could be either development-intensive or marginal cost-intensive. We show that the interaction between the role played by advertising and the cost structure of green product design impacts the effectiveness of accentuation for both the firm and the regulator. In particular, for marginal cost-intensive products, accentuation is shown to be a losing proposition for both the firms and the regulators under combative (market-share-increasing) advertising, yet a winning proposition for both under constructive (market-size-expanding) advertising. For development cost-intensive products, the results are mixed and depend on the level of inherent accentuating attributes and the per-unit valuation green premium.

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